Most Common Reasons Why a Refinance is Declined

• The reasons for a mortgage refinance decline tend to change as the credit market tightens and loosens. For the most part, however, there are a few common reasons for a denial. Poor credit is a universal reason for a decline. Owing more than your house is worth will usually be an automatic decline as well, as no bank will want to take on such a risk.
  
  

Types

• Mortgage refinances commonly come in a several different varieties. The rate and term refinance is effectively a mortgage swap, replacing an existing loan with a newer one that has different terms. The cash out refinance, as the name implies, allow a person with equity in their home to cash out a percentage of it.
  
  

Significance

• Mortgage refinances are a crucial part of our financial system. Cash out refinances allow people to open or expand businesses and consolidate debt. Since so many mortgages done in the past several decades have been adjustable rate mortgages (ARMs), rate and term refinances are important tools to get people out of loans with rising rates.
  
  

Considerations

• Any person considering a refinance of their mortgage should consider a number of things first. Perhaps the most important of which is what the APR of the new proposed mortgage will be vs. the APR for their existing mortgage. The APR is the annual cost of credit to the customer and will tell you most of what you need to know as to whether or not you are getting a good deal.
  
  

Warning

• While the mortgage industry is full of honest, knowledgeable, and reputable brokers and loan officers, homeowners should be on the look out for opportunists. A good rule of thumb is that any broker who advises that you refinance out of a fixed loan into an adjustable rate mortgage, probably doesn't have your best interest at heart.