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My salary was reduced. Can I still refinance my mortgage?

You'll need to let your lender know about your change in salary.

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Question:

I'm in the middle of refinancing my mortgage, and my salary was just reduced by 25 percent as a temporary measure because of the pandemic. Do I have to tell my mortgage bank? Will it affect my ability to refinance?

Answer:

Yes, you must let your lender know about the changes to your salary, and unfortunately it could impact the refinancing process, our experts say.

Many homeowners have been taking advantage of mortgage rates that are near record lows in order to refinance. But at the same time, amid the economic volatility of the coronavirus pandemic, lenders are instituting stricter requirements and longer processing times for those looking to refinance. 

"All banks right now are asking for a reinstatement or proof of people’s incomes prior to lending," says Deanna Kory, a broker with Corcoran


Editor's note: Click here for more of Brick Underground's coronavirus coverage.


A record number of Americans who have filed for unemployment, as non-essential business close and jobs across the country are cut as a result of the Covid-19 crisis. At the same time, there is now a substantial backlog of mortgage refinance applications. In response, banks are verifying income with all applicants. 

"The borrower would need to disclose that their salary has changed, and they would need to show their most recent pay stubs. The bank will also do a verification of employment," says Robbie Gendels, senior loan officer at National Cooperative Bank. "Hopefully, their ratios can meet the banks guidelines or possibly, the bank may lower their loan amount to proceed." 

Your debt-to-income ratio is a major consideration for mortgage lenders, and since your salary has dropped, that adjusted ratio may affect the refinance rates you're able to lock in, as well as the size of your loan. Have a conversation with your loan officer about your options amid this rapidly-changing situation. 

Homeowners who have lost income and find themselves unable to make their mortgage payments also have some recourse. Some lenders are offering payment suspensions, and mortgage payments have been waived for 90 days for New Yorkers who have lost work. 


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