How Do I Know If I Am Eligible to Refinance My Mortgage?
The way you determine your eligibility for refinancing is roughly the same as when you qualified for your initial mortgage. Your eligibility and the size of the loan you can obtain are determined by your income, assets and liabilities, credit score, and the value of your property. Therefore, checking your eligibility will also help you determine if you will be able to fully refinance your mortgage and whether refinancing can be cost effective for you.
Refinancing can be helpful if your credit score has improved, as you may be able to obtain a new loan with a lower interest rate than your current loan. If your credit score is lower than when you first applied for a mortgage, your new potential interest rates may be higher and refinancing may not be beneficial until you can bring up your credit score.
Your "loan-to-value" (LTV) ratio is an important part of determining your eligibility for refinancing. This ratio is a comparison between the value of your home and the amount of loan you are requesting. Lenders have particular limits for LTV. If your prospective LTV is outside those limits, you may not be eligible for a refinancing loan or you may only be eligible for less favorable terms than your current loan, making refinancing unhelpful to you.
Another issue to consider when refinancing is whether the value of your house has decreased. If it has, your home may be worth less than what you owe on the mortgage. Even if home prices remain the same, you might still owe more than the original value of the mortgage if you failed to make monthly payments at least as much as the interest you owe. In these cases, it will be very difficult to refinance.
- What Does It Mean to Refinance a Mortgage?
- How Does My Credit Score Affect Refinancing?
- Is Refinancing Available for FHA, VA, Jumbo, or USDA Loans?
- How Much Equity Do I Need to Have Before Refinancing?
- How Do I Refinance My Mortgage?
- What Are Some of the Benefits of Refinancing?
- When Should I Refinance My Mortgage?
- What Are the Disadvantages of Mortgage Refinancing through a Third-Party Mortgage Broker?
- Will Refinancing Lower My PMI?
- What Are the Costs and Fees of Refinancing?
- Should I Refinance If I Only Plan on Living in My Home for a Few More Years?