You are currently browsing comments. If you would like to return to the full story, you can read the full entry here: “Why do you need equity in your home to refinance your mortgage?”.
-
Archives
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
-
Resources
-
Meta
EMANUEL
They want your new loan to be less than what the property is worth in case they have to repo it.
STEPHEN
You have to have some equity, how else will the closing costs be paid? If you have the cash on hand, fine, but most times that’s not the case.
Many lenders will not provide a refinance loan for more than 80% of the home’s value (called the loan-to-value ratio, or LTV), meaning that you would need to pay an additional 20% of the value of your home upfront to qualify for a refinance loan. The lender is protecting their own hide. Because if you default they could lose a lot of money. Most people who end up being foreclosed leave the house in a dump, plus add foreclosure costs and they’re out even more money. Which makes sense to me.
HERIBERTO
Since mortgage companies have been burned by people with little to no equity (they tend to walk away when the value drops a little), they aren’t willing to take that risk anymore.
In general, if you do not own at least 20% of the CURRENT value of your home you are not going to have an easy time of refinancing. You will probably pay PMI or not be able to complete your transaction.
This ensures that you have ‘skin in the game’ and that your personal money is on the line.
good luck!