You may be wondering if a “no
down payment” refinance loan is even and option,
and that may very well be a reasonable question. There
are some things lenders will look at when determining
whether you’re eligible for refinancing.
- How reliable you’ve been when making the payments
on your existing loan
- How your credit score may have changed since you
took our your existing loan
- How the value of your property may have changed
during the course of your existing loan
Why would the property value play a role? If you’ve
done some major renovations on your property or property
values in your area have skyrocketed, your home may
very well be worth much more than you owe against it.
This can be true even if you’ve only paid on your
loan for a year or two. In that case, you may find that
you can refinance to get better rates or terms without
applying any money down, even if you still owe the majority
of the original loan amount.
As a general rule, if you’ve paid on your home
loan for at least a few years and have had no major
credit issues during that time (especially issues with
the lender you want to refinance the loan), you should
be able to get a refinance loan with nothing down. Keep
in mind that most refinance loans require some closing
costs and you may be required to either pay those fees
or include them with the amount of your loan.
With this in mind, would there ever be a time when
no down payment refinance loans weren’t an option?
If your current mortgage includes a balloon payment
and you’ve had credit issues with the lender,
that lender may require that you put something down
as an indication of your willingness and ability to
make timely payment on a refinance loan. That same may
be true even if you’re not being forced into a
refinance by a balloon.
Remember that it could be in your best interest to
put something down, if you can afford to. Every dollar
that you don’t borrow is not only one dollar that
you don’t have to repay, it’s also a dollar
that you don’t have to pay interest on. That could
significantly lower your monthly payments or the length
of your loan – both very attractive long-term
options.
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