Finance

Home Loan Refinance Myths

Myth # 1

If I have repaid all my debts, defaults and arrears I should qualify home refinance of home loan with a bank.

Many borrowers do not realize that that repaying debts and defaults does not remove them from their credit history. You bad credit remains on your credit report up to 7 years after the defaults are repaid. If looking to refinance your home loan you will need to consult specialist non-conforming lenders or mortgage brokers who can offer the loan products of such lenders.

Myth # 2

The most important thing about my home loan is the interest rate

In fact while your rate is important it is far from the most important consideration. It may be that your mortgage is currently with a lender where you are paying 7.5% interest only. If you decide to refinance your home loan with another lender offering 6.5% rate instead – you will not necessarily be ahead. It could be that the later home loan is a principal and interest product and while your rate is lower, your monthly repayments will be higher.

Myth # 3

I have a lot of equity in my home therefore home loan refinance should be easy to qualify for.

Having a large amount of equity certainly helps. However your lender will need to see your income before they can approve your mortgage refinance. Income is just as important as equity when it comes to home loan refinance.

Myth # 4

Being on maternity leave should not affect my chances of refinance

You are on maternity leave for 12 months and your employer is holding your job for you  when you are ready to return to work. So why should this be a problem?

Lenders will not take your income into account at all if you are on maternity leave at the time that you are applying for your refinance. It is best to wait until you are back at work.

Myth # 5

I can consolidate my unsecured debts into my mortgage beyond the value of my home.

Your overall mortgage after debt consolidation should be under 90% at worst and under 80% ideally. It will not be possible irrespective of your income or credit history to refinance a home loan where your final mortgage is greater than the value of your home.

About the author

Oliver Revilo