Refinance Denied – Know the Reasons

Refinance Denied – Know the Reasons

You can enlist a number of benefits of refinancing, like it lessens the mortgage payment burden, grants you money to pay off high interests debts and allows you to switch from principal interest to fixed interest. However, there are a number of homeowners who apply for refinancing but don’t get approval. If you want to save yourself from a refinance denial, then you must avoid the reasons that hinder your approval.

Here is a quick list at three main reasons:

1. Inadequate Equity

Often applicants don’t have adequate equity. If you are applying for refinancing your residence then you must have enough equity. It means that the worth of your home must be more than the amount of borrowed money. Although every lender has his/her rules, most lenders grant loan in accordance with the value of your home. So the applicant must have enough equity to satisfy the lender.

2. Low Credit Score

With poor credit score, you cannot qualify for a refinance. Just like in bank loans, credit score is also important for refinance. So you must check your credit report before applying, try to fix errors and make every possible effort to improve your credit score. Often fixing minute errors in credit report can stabilize your credit score considerably. If you find that your credit score cannot be improved, then it is better to opt for another option instead of refinancing.

3. Too much Debt

This is probably the most common reason due to which a refinance application is rejected. When you apply for refinancing, the lender inspects your income, credit score, expenses and debts. With too much debt relative to your monthly income and expenses, it is probable that your request will not be accepted. The lender also includes possible increments in your salary, but if the debt is too high, then you don’t have good approval chances.

If you think that you don’t have satisfactory credit score or equity, it is a wise decision to choose some other financing option than refinancing. It is important to make sure that your current financial status meets all the requirements, before applying or refinancing. Moreover, you should also consult an expert before making any decision. An expert has adequate knowledge about the constantly changing dynamics of mortgage market and can guide in a better way about the most appropriate financing option that suits your needs.



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