Smart About Money

How come everyone else can refinance … and you can’t?

If you read the news reports or listen to ads, you might think that every homeowner in the entire United States has recently refinanced into a mortgage rate so low that it practically amounts to a complete giveaway.

That idea is making a lot of people feel confused, frustrated, and concerned – specifically, those who are finding themselves unable to qualify for one of those super-low-rate mortgages, for various reasons that we’ll take a look at in a minute.

If you’re thinking you’re the only one whose mortgage rate isn’t, well, under 4 percent, believe me, you’re not!

First, the “everyone but me is getting super-low rates” myth is just that – a myth. One reason? Many people had already refinanced as interest rates were dropping, and now they have a rate that’s “good enough,” meaning that given the time it would take to apply and refinance plus the closing costs, it doesn’t make sense to refinance again.

Also, the rates you hear thrown around – especially in radio commercials – are often teasers that either aren’t actually available or are only available to people with a lot of equity and completely perfect credit.

That means that many of the people who respond to those ads discover that the rate they’re being quoted for their loan is actually closer to the rate they already have … and it doesn’t make sense for them to refinance!

But what if you very much want to refinance into a lower rate and simply can’t qualify because of a lack of equity or credit problems?

Lack of equity is the more common predicament we’re seeing. And it’s certainly not an individual homeowner’s fault that a home that appraised at a certain amount even a few years ago is appraising for much less today.

What can you do if you’re in the “not enough equity” boat? For some homeowners who have other assets – stocks, bonds, or other savings – liquidating some of those assets and applying the proceeds to their mortgage can be a smart move. (Speak to your banker and financial advisors first to see if this strategy might work for you.)

Credit card debt can be a problem in a couple of ways. Sometimes the borrower has more debt-to-income than the guidelines allow. Other times, there’s a slow payment history.

What can you do if credit card debt is keeping you from refinancing? Ideally, you should speak personally to a financial professional – either the loan officer at a local bank or even a CPA – to get advice for your particular situation.

Refinancing obstacles can be cleared up, but it usually requires determination, targeted actions, and even patience on the borrower’s part.

Nick Maffeo is the senior vice president, chief financial officer, and treasurer at the Canton Co-operative Bank in Canton. Have a question? Email to cancitizen@aol.com.

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Posted by Nick Maffeo on Dec 16 2010. Filed under Opinion, Smart About Money. Both comments and pings are currently closed.