How much equity do I need to get a refinance loan?

Obtaining equity

Home mortgage refinancing is typically available to homeowners who have sufficient equity and relatively good credit scores, but the amount of equity needed in order to refinance varies from lender to lender.

Equity is the market value of your home minus any outstanding loans. The industry standard among prime mortgage lenders used to be at least twenty percent of equity available in the home before a refinance loan would incur extra fees and higher interest rates, but this is not always the case.

The current trend leans toward more stringent standards. This is a result of the mortgage lending frenzy a few years back that consequently allowed many homeowners to refinance their homes at elevated market values. As market values began to decline many people found themselves actually owing more on the home than it was worth.

Combine this with the large amount of homeowners who indulged in rock-bottom adjustable rate mortgages for refinances, which inevitably led to much larger payments than they could afford, and the end result is an entire mortgage lending industry that has become much more cautious about lending standards.

For this reason you may not currently be able to find an abundance of lenders who are willing to offer a refinance of a mortgage loan for homes that do not hold substantial equity.