28 June 2010

Here are three most typical scenarios where a small drop in home prices can really change your situation:
•    The line of credit (LOC):
If the homeowner has 20-25% equity, it may become a trouble in the end, because LOCs require a 20% equity minimum. If your loan-to-value is 75-80%, than even in case of a small drop LTV will rise to 80% and more – as a result, you may not get approved.
•    90% LTV refinancing:
The maximum refinance loan-to-value is 90%. For example, you’re at 85% LTV now and want to consolidate some high-interest debt into your mortgage. Even a 3% price drop can waste most of your equity.
•    80% LTV refinancing:
The maximum uninsured financing loan-to-value is 80%. If your current LTV is about 75%+, a small price fall can push you over 80% loan-to-value – in addition to it you’ll have to pay mortgage default insurance to get the best rates. Of course, there are some exceptions, that’s why it’s necessary to consult your mortgage broker.
In other words, if you’re thinking about refinancing – don’t wait, it can cost you a lot to get approved.