Refinance Home Mortgage Loan – How Maximum Loan Amount Determined?

When refinancing many applicants may want to get the maximum amounts they qualify. There are several factors determining the maximum loan amount.
The most important one is the property appraisal. All refinance mortgage products have their loan to value ratio. If this is 80%, the lender will only lend up to 80% of the value of the property. So the valuation of properties open market price becomes very important. People can check sale prices of the properties on their surrounding area to reach to an estimated value of their property. There are a few companies that list the price achieved on recent sales. Other option is to get a valuation which could cost anywhere from $500 to $1000.
Other determining factor is the household income on joint applications. If husband and wife applying together, lender takes into account their total income. There are various ways of reaching to maximum loan amount. Most companies use multipliers. If the multiplier is 3, they can only borrow up to 3 times of their total income. Even the property values well, income levels must justify borrowing.
Banks look at the household income and expenditure statement as well. If an applicant has a high ratio of borrowing including credit cards and personal loans, this will have a reducing effect on maximum amount of loan. Because the applicants need to make other loan payments as well as the mortgage, their income must cover all those payments. They take into account other high ticket spending like school fees, too. In short, household income must comfortable exceed household spending. Households with high spending may find it hard to justify the loan amounts.
Some lenders may offer a lower amount of refinance mortgage, while others may just decline the loan application without commenting on why it is declined.


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JS Lee has years of mortgage brokerage experience. Her other site is Mortgage Refinance Rates