Ask Stacy: Why Can’t I Refinance My Home?


What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

She's got good credit, but her lender refuses to refinance her mortgage. If it would lower her payments, why wouldn't they be happy to do it? Here's some sound advice for anyone who borrows.

This reader’s question is a stark reminder of how important it is to consider the implications of life changes before they occur…

Please help! My husband and I are retired and want to refinance to get lower interest. Wells Fargo has refused us, even though we have a great record. It’s a Fannie Mae mortgage, and four years ago both of us were working. Now we’re retired. They claim we don’t bring enough money in to refinance. We’ve been paying the large payment every month, no matter what. Don’t they think that maybe paying a lesser amount each month would help us stay out of trouble in the foreseeable future?

Do you know who we can get to help us (at no cost) to refinance and pay a lower mortgage rate? We would be very grateful for whatever help you can give us.
– Mary

Reading this brought me back 20 years, to a time when I had a very similar situation.

In 1991, I quit my job as a stock broker to devote my full attention to Money Talks News. Like Mary, I wanted to get my bills as low as possible, so I applied to refinance my mortgage. It wasn’t big – as I recall, about $50,000. I had more than $100,000 in the bank.

Since I had virtually no other bills, a flawless credit history, and substantial savings, I assumed my mortgage company would happily refinance me to a lower rate. No dice.

My problem was the same as Mary’s: insufficient income. When I complained I had enough money to pay the entire mortgage two times over, they explained that while money in the bank is always nice, it’s never enough to get a loan, including a refinance rendering it more affordable. Why? Because you can take the next plane to Vegas and lose your life savings. Income, on the other hand, provides the lender a verifiable source to meet future payment obligations.

In short, lenders like to see savings, but they need to see income.

So here’s a lesson for those of us who may someday leave the workforce to have a child, start a business, go back to school, join the Peace Corps, or (as in Mary’s case) retire…

If there’s any chance you’re going to need borrowed money, grab it before you drop a source of income.

Of course, this isn’t Mary’s fault. She couldn’t have foreseen that four years into her retirement, she’d have an opportunity to refinance her mortgage at the lowest rates ever.

What can Mary do?

When this happened to me, I sold half my house to my roommate – a long-time friend – then used his income to qualify for the refinance.  Everyone was happy. I got to refinance to a lower rate and keep partial ownership of my house, and he got to stop paying rent and start gaining equity. This worked out especially well, since I was planning on leaving town to pursue my new career. Having him as part owner ensured the house would remain well-maintained.

Mary could try a variation on this theme by seeking a co-signer: Perhaps she has a child with sufficient income to co-sign her loan. It’s not an ideal solution, because the child will be on the hook for Mary’s mortgage, and that will also reduce their ability to borrow for themselves.

Another possibility is to see if she qualifies for any programs designed to help homeowners refinance. For example, a few weeks ago I did a story called More Help for Homeowners: HARP 2.0. It’s about a program designed to help underwater homeowners – people who owe more on their homes than they’re worth. But if she qualifies, there’s no minimum credit score, qualifying income, or appraisal required. I won’t repeat all the details from that post here, but she should definitely check it out.

Even better, she can simply call the 24-hour Homeowner’s HOPE hotline, which offers free advice from government-approved housing counselors. They’ll be able to tell her what, if any, programs she may qualify for.

And if Mary doesn’t qualify for any program and isn’t willing or able to get a co-signer, she’ll simply have to keep the mortgage she has. It may be small comfort, but at least she’s not alone: There are plenty of people these days tantalized by historically low rates, but they’re unable to qualify for them.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Lookin’ Good! How to Get a Killer Deal on Eyeglasses

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,898 more deals!