In the tightened lending environment following the housing crisis, many homeowners found themselves unable to refinance their home loan, whether it was being rejected for a variety of reasons or simply not being able to make the numbers work. If this happened to you, don't let it turn you off refinancing for life. The right opportunity to try it again might already be waiting for you.
Here are 5 reasons to take a fresh look at refinancing:
- Credit. The cruel trick played on many homeowners following the housing crisis was that even as refinance rates fell to record lows, they were unable to get approved for refinancing. Burned by too many bad mortgage loans, lenders raised their underwriting standards. At the same time, many borrowers were experiencing setbacks in income or problems making ends meet that led them to be viewed as a bigger risk. Now though, several years into an economic recovery, your financial situation may have improved, and some lenders are starting to ease their standards a bit.
- Property value. Another common reason homeowners were turned down for refinancing loans in recent years was because their mortgages were under water, meaning that the value of their properties had sunk below the remaining balance on their mortgages. If this happened to you, consider that the housing market nationally has bounced back by more than 30 percent since hitting bottom in early 2012. Between that recovery and the additional principal payments you have made on your mortgage, your loan may have since emerged from under water.
- Mortgage rates. This may seem like more of a barrier than a reason to take a fresh look at refinancing, but instead it should change the way you should think about refinancing. Switching to a shorter-term loan to capture a remaining possibility of lowering your rate, or refinancing from an adjustable to a fixed rate loan to end your exposure to rising rates should now make refinancing a higher priority.
- Closing costs. If this stopped you from refinancing in the past, remember that you once saved up not just for closing costs but for the down payment on a home. Don't consider the door to refinancing to be locked shut because of closing costs; a little more time and careful budgeting could re-open that door.
- Budget. Sometimes you have to sacrifice short-term to benefit financially in the long run. One example: shortening your mortgage to pay interest over fewer years. When times were tight, the higher monthly payments involved may have been prohibitive, but now that the job market has improved, perhaps you can make this work.
The conditions affecting refinancing involve several moving parts such as mortgage rates, home prices, lending standards, and your personal financial condition. With so much subject to change, never look at refinancing as a one-time opportunity. It can pay to periodically take a fresh look at refinancing.