5 Things That Hurt Your Chances of Refinancing Your Mortgage
Refinancing your mortgage can be a big step for homeowners. It may allow you to lower your interest rate, cash out equity to pay off other debts, or become mortgage-free faster. But it’s important to remember that just because you have a mortgage, doesn’t mean you’ll automatically qualify for a refinance. Both the lending industry and your financial picture may have changed drastically since you last applied. Here are five issues to be aware of that can impact your chances of successfully refinancing your mortgage.
Missed mortgage payments
Once of the first things a lender is going to look at is your previous mortgage payment history. If, even in the face of other credit troubles, you’ve always made your mortgage payments on-time it signals that you take this as a serious commitment. Evaluate your mortgage records and make sure that all your payments have been made on-time. If not, prioritize this in the months before a refinance and be prepared to address the lapse in your credit application.
While your mortgage performance will carry special weight in a refinancing application, it’s also important to look at your overall credit score. Do you have late payments, missed payments, accounts in collections, or high levels of credit card debt? Just because you have a troubled credit history doesn’t mean you won’t qualify for a refinance. But it’s important to evaluate whether you’ll qualify for terms that are as good as your current mortgage. Credit problems could lead to a higher rate that minimizes the benefits of refinancing.
A previous refinance
Banks often have internal guidelines on how often they’ll refinance a mortgage. In some cases, the limits run between six months and two years. If you’ve recently refinanced to capture the benefits of lower interest rates, for example, it’s important to remember that you may need to let some time elapse before you’re able to refinance again.
Change of residence
Let’s say that you bought a starter home and at some point you outgrew it or decided to upgrade. Rather than sell the property, you held onto it as an investment and rented it out. Refinancing a property where you no longer reside may prove to be more challenging. Banks see lending on investment properties as more risky than a primary residence; after all, foreclosure doesn’t mean that you’d be losing the roof over your head. Expect to face more stringent credit and income level demands when refinancing an investment property.
Carrying a second mortgage
If you’re carrying a second mortgage on your home, that may complicate your refinancing application for two reasons. When you’re refinancing to consolidate two loans, a bank may consider that a “cash out,” even if you’re not actually receiving money. The second instance has to do with loan priority. Should you default, the oldest loan usually gets priority in repayment from auctioning off the property. But if you’re refinancing your main mortgage, the bank is unlikely going to be willing to take priority behind a smaller loan. Success depends on the mortgage companies working out an agreement.
Are you a homeowner in Las Vegas who is considering refinancing your mortgage? Contact Sydnee Johnson today to discuss your options. Experienced lenders can help you navigate even the most complicated situations.