Q: I closed on a house in November 2007. I got a loan at 6.35 percent, and it was immediately sold to another bank. I just went down to the branch to refinance, but they rejected my application because I don’t live there. I tried to explain to them that I’m having massive construction work done and will move when finished. Now, I can’t even get the loan consultant at the branch to return my calls or e-mails. What do you suggest?

A: First off, unless you have a strong relationship with a personal banker or some really compellingly preferential offer being presented by the bank that holds your deposit accounts, there is rarely a compelling rationale for just walking into a branch to get a home loan. In my experience, you’ll get higher-touch service and will have more lenders and mortgage program options at your disposal with a reputable broker you find via referral from your Realtor or others in your circle.

Good mortgage brokers are used to competing on service and loan terms to get your business, rather than having a steady stream of walk-in business, so you might even get a better deal that way. My first suggestion, to answer your question, is to ask your Realtor, family members and friends if any of them have a mortgage pro who they love — call the referrals and, when you find one with whom you click, use him or her as your personal mortgage counselor.

Mindset Management and Need-to-Knows

Now, if you ask me, you and the mortgage rep at the bank branch had a simple, but profound, miscommunication. Mortgages are classified on the basis of whether they are secured by a primary residence (i.e., owner-occupied) or not (i.e., non-owner-occupied). Non-owner-occupied mortgages are very tough to get right now with less than 30 percent equity in the property. However, the fact that you are temporarily displaced from your primary residence because of construction work does not render the property anything other than your primary residence.

I am confident that this communication disconnect would have been much less likely had you been dealing with a broker who worked for you, rather than one who works for the bank.

I have a deeper concern about your situation. Why do you want to refinance in the first place? If you have a loan at 6.35 percent, sure — it’s possible that you could get a somewhat lower rate now. It is possible, but not probable, that you could get a rate sufficiently lower to be worth the cost of refinancing.

In the never-ending race for lower interest rates, I think many homeowners have forgotten that refinancing actually costs money. It’s harder to forget now, because with home values dropping or marking time, you are likely to have to actually write a check to pay for your refinance. Unless your new interest rate is substantially lower than your old one and you plan to stay in the new loan for a very, very long time, it may not be worth your while (or your money) to refinance at this time. …CONTINUED

Honestly, what I expected to hear you say was that you had a value issue — most homes in America have not appreciated since November 2007, and many have depreciated. If you have negative equity in your home, that itself will make a refinance difficult or impossible.

If your home is in the midst of a major remodel, that throws another monkey wrench into the value element of the equation. A mid-construction project is quite difficult for an appraiser to assign a value to, especially these days, when appraisers are literally staking their licenses on their professional opinion that the bank could sell the property at the appraised value. And depending on where your home’s remodel is at — if it is minus a kitchen, or any of the other key characteristics of a saleable home — you might not be able to do a refi, even if you do have some equity in the home.

Action Plan

You are a smart homeowner — you understand that major construction is not a do-it-yourself project, so you hired contractors. Well, mortgage matters are not do-it-yourself projects either, even at their simplest — and your situation is quite complex. If we have learned anything from the recent housing crisis, it should be that well-planned mortgage decision-making has a potentially critical impact on your daily quality of life. You deserve to have a professional who works for you help you analyze, plan and execute your mortgage moves.

Check with your Realtor, relatives and friends, and get a referral to a good mortgage broker and/or mortgage planner, then ask them for help assessing whether and how you should go about refinancing your mortgage.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.


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