As interest rates in Utah are at record lows, many homeowners are keen to refinance their mortgage as soon as possible. This is generally a sound move, particularly if you have no plans to sell your house and change residences in the near future. With a much lower rate, you could save thousands of dollars over the lifetime of your new, refinanced loan.
But just because you want, you can get. A refinance is technically a new mortgage, which you must apply for first. Even if you have qualified for a home loan in the past, it doesn’t necessarily you can qualify this time around.
In many cases, mortgage refinance applicants are denied for different reasons. Of all culprits, a high loan-to-value ratio, or LTV, is the most notorious.
You are a Big Risk
If your LTV is well above what lenders consider acceptable, expect a lot of doors to close. This is because a high LTV means you lack enough equity on your property. The smaller ownership you have on your home, the lesser inclined you are to keep paying — at least in the eyes of lenders.
More often than not, having a high LTV (or worse, negative equity) could single-handedly lead to denial.
You Have to No Option but a High Interest Rate
If you’re lucky, some lenders would still agree to let you refinance your mortgage in Utah — for a steep price. Because you have less equity at stake in the deal, industry expert City Creek Mortgage explains that you’re subject to a higher rate.
This might defeat the purpose of your refinancing in the first place. Instead of saving you money down the road, the new mortgage might do little to lower your expenses, and only reset the clock with a fresh term.
You Might Have to Keep Your Current Loan
The magic number is 80%, so if the appraisal shows that you are yet to own 20% of your property, you might have to count more months of repayment to bank enough “ownership”. Until then, refinancing your mortgage would remain a dream beyond realizing.
Fortunately, there are financial products that allow you to refinance despite your equity problems. The key is to speak with an experienced broker to discover and access these mortgages.