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Advice to help you decide to refinance or sell

Mark Cappel
UpdatedOct 31, 2007

My mortgage payment went up almost 300 dollars, I want to refinance, or sell, or get an equity and invest. Please advice.

I have to mortgages on my home and one was a two year, Now my mortgage payment went up almost 300 dollars, I want to refinance, or sell, or get an equity and invest. I am not sure what should i do now, I know the market is bad, but i am having a lot of hard time with the payments, plus taxes, and insurance

Thanks for your plea! You are just one of many consumers that are becoming aware of the credit crunch that affects your financial health. If you have equity in your home, I'd highly suggest trying to refinance your home.

So that you know, typically there are several considerations when getting a mortgage loan - three of the most important are: i) your loan-to-value; ii) your debt-to-income ratio; and iii) your credit rating. I will review each one in turn.

1. Loan to value: This is calculation looking at how much you want to borrow, relative to the value of the home. It is directly impacted by the amount of money that you can put down on your new home. The larger the down payment, relative to the value of the home, the less risk the lender has to take in extending to you a loan.

2. Debt to Income: This ratio looks at your monthly debt obligations (payments of interest and principal) as a percentage of your monthly income. If you have a significant amount of debt, your debt service burden may be too high for a lender to comfortably give you a loan. You need to either increase your income, or cut your debts.

3. Credit Rating: Your loan, including terms like interest rate and points, will depend on your credit worthiness. One measure of credit quality is a credit score (sometimes a specific 'FICO' score). Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.), the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history. If you have a good credit score, you will get a better loan.

The only way to determine whether or not you will qualify for a refinance loan is to apply for a loan with several different lenders and/or brokers. Not only will these mortgage professionals be able to tell you whether or not you currently qualify, but if you do not qualify, they can tell you what aspects of your financial situation are causing you problems, and make suggestions about how to improve your chances to qualify for a loan. They may also be able to direct you to other available resources available to assist you in saving your home.

If you would like to read more about mortgage refinance loans, I encourage you to visit the Home Refinance Resources page at If you enter your contact information in the Savings Center at the top of the page, we can have several pre-screened mortgage brokers contact you to discuss the loan options available to you.

If you find that you do not qualify for a conventional refinance loan, you may want to consider selling your home. While I know that selling the home may be an unpleasant thought, selling the home on your own terms is certainly preferable to the possibility of losing the equity you have worked to build in foreclosure proceedings. If you think that selling your home may be the best course of action to take, you should speak to a real estate broker to determine the current prices in your neighborhood and whether or not selling your home is a wise decision under current market conditions.

While I encourage you to explore your options regarding refinance and the possible sale of your home, you should also contact your current mortgage company to discuss any assistance they can offer you with your mortgage payments. Many mortgage lenders will assist borrowers, especially those with extreme financial hardships such as yours.

I hope the information provided helps you Find. Learn. Save!




bbrads, Dec, 2007
You have quite a bit of equity, which means that your LTV is low (44%) and therefore the risk to your lender of losing money is very low. However, you are correct that stated income loans are more challenging now than ever... but with good credit and a low LTV it is a doable loan -- just a little more challenging in this environment.You should certainly apply for your refi and try to get a low monthly payment (and shop around!)
Hi,We have a 15 yr mortgage on my home (making extra payments to finish sooner) and about $700,000 equity in it (home value of approx $1.250.000) We did a stated income for our mortgage. A couple of hundred thousand dollars in savings, but our household income is only about $100,000-$150,000 pr yr . My husband and I own a business that generates about $600,000 pr yr, but net is only $100,000. Our mortgage payments are too high monthly. Our business is 3 yrs old. Credit is good to excellent. We'd like to lower our mortgage payments, and are afraid that if we dont increase our income, we will have to sell our home. Do you think we would qualify for a refinance? So we can reduce our payments and keep our home? Or is our income going to interfere with that?Thanks