Refinancing Challenges

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  • Having little home equity, other unpaid debt, and low cash reserves can make refinancing tough.
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3 Things That Can Make It Hard to Refinance Today

There are “do’s” and “don’ts” to every part of life and that includes home mortgages. Unfortunately, very few consumers raise questions about what mistakes to avoid.

There are three things that can really make it hard to refinance today:

  • No Equity in Home: If you have little equity built up in your home, refinancing is going to get tougher. Another term for this is the loan-to-value (LTV) ratio of your home. It is usually described as a percentage of the overall loan compared to the appraised value of your home. If you have less than 10% equity or an LTV ratio of 90% or more, it isn’t going to be easy to refinance your mortgage.
  • Other Unpaid Debt: If you have other debts on top of your mortgage, they can impact your ability to refinance. Lenders today need to see that you are paying less than 38% of your income to your debts. If you are paying more of your earnings into your debt, you will not be able to get the best rates and may not even be able to refinance at all.
  • No Cash: The last stopper on your refinance could be a lack of cash on hand. Having cash set aside for emergencies as well as to cover closing costs is an important part of refinancing. Cash may also be used to get a better interest rate or lower the overall loan balance. Having some cash on hand is important if you want to refinance successfully.

Try the innovative Bills.com refinance calculator to learn if a mortgage refinance is cost effective for you and your unique circumstances.

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