What's the Ideal Debt-to-Income Ratio for Refinance on Your Mortgage
When you purchase a home and take out a mortgage, you might not realize that the interest rate you pay on this type of loan can change. If you have an adjustable-rate mortgage, for example, the lender can change your interest rate in certain cases and this may result in you paying more in interest. Mortgage rates around the country also change periodically based on a variety of factors, such as inflation or the country’s economic growth. The interest rate you pay has a large impact on how much you actually pay to own your home over time, and you may decide to refinance your mortgage to obtain a lower interest rate (and subsequently get lower monthly payments).
The process of qualifying for refinancing has many similarities to qualifying for an initial mortgage loan in the first place — refinancing is essentially the process of getting a new home loan (with preferably better terms) that pays off your old mortgage. And, similarly to getting a conventional mortgage, one of the biggest factors that impacts your credit and determines whether a lender will refinance your home is your debt-to-income ratio. If you’re considering a refinance, learn how this ratio impacts a loan, along with the general ratio mortgage loan refinance lenders look for.