Refinancing your mortgage is a strategy many homeowners use to renegotiate their mortgages and lower their monthly payments. While you can technically refinance how many times you like, you need to time it right and make sure it is to your benefit. For example, interest rates are low and your income has increased.
But if you find you cannot refinance your home, it could be for these four reasons:
You Have Poor Home Equity
Home equity is defined as how much home the owner owns free and clear compared to its current value, your down payment, and mortgage. For example, you buy a home for the price of $250,000 with a $12,500 down payment. With a mortgage of $237,500, your current home equity would be $12,500.
Having low equity means that you cannot use it as an asset when you go to refinance. Live in your home a few more years to build up enough home equity.
You Are Close To Paying Off Your Mortgage
If you are close to paying off your mortgage, there will be little point in refinancing. Refinancing your home means you are essentially getting a whole new mortgage, so you do not want to get a new mortgage when you are about to pay off your old one.
You Are Late On Monthly Payments
While hard times do happen, like a medical emergency, it is essential that you keep up with your monthly mortgage payments, paying on time, every time. If you fall behind, you will be less likely to be approved for a refinance since you will be deemed a risk by lenders.
Keep up with your payments so you do not fall behind and default on your loan.
You Have A Low Credit Score
A good credit score is an indication to lenders that you are financially responsible and as such, more financial opportunities tend to be open to you. A low credit score means you will not be able to take advantage of refinancing.
Take steps to improve your credit score before trying to refinance again.