Why Can’t I Refinance To Lower My Interest Rate?
The current poor economic conditions, which include high unemployment and decreased compensation, have forced many Americans to tighten their belts. One great way for people to reduce their monthly costs has been to refinance their mortgage and take advantage of today’s very low rates. Unfortunately, there are several reasons why a person may not be able to refinance.
Poor Credit Score
A poor credit score is the first reason why a person may not be able to refinance and lower their interest rate. One of the main changes that banks have undertaken in their underwriting process is to increase the required credit score. People with low credit scores are far more likely to default on their loan payments than a person with a good credit score and many banks are no longer willing to risk lending to a person with bad credit.
No Equity
A lack of equity in their home could be the second reason why a person may not be able to refinance and lower their interest rate. In years past many banks were willing to give financing of up to 105% of a home’s value. Now that property values have decreased, banks have realized that home prices will not always increase. To cover themselves from the risk of giving out an underwater mortgage, banks now require a large down payment.
Too Expensive
The cost of refinancing into a new loan is the third reason why a person may not be able to refinance and lower their interest rate. While refinancing into a lower rate will always reduce your monthly payment, the upfront costs of refinancing a mortgage may be too expensive for a borrower to pay.
Related posts:
- Can I Lower My Mortgage Interest Rate Without Refinancing?
- Does My New Refinance Rate Have To Be At Least 2 Points Lower?
- How Will A Lower Mortgage Interest Rate Affect My Tax Deduction?
- Does The Equity In My Home Affect My Mortgage Interest Rate?
- How Does Bond Interest Rate Affect My Mortgage Interest Rate?
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