Cash-Out Refinance Options For Homeowner Debt Repayment–Exploring The Benefits ... Red, White, and Blue Press
It has recently been reported that the number of refinance applications on home loans have increased, which may indicate that numerous homeowners are looking to take advantage of current conditions in the housing market that may offer affordability, but there are also homeowners who have used times that have brought low interest rates to find debt relief on unsecured debt obligations with the use of cash-out refinancing. Obviously, this is not a practice that is used by every homeowner, as some are simply looking for more affordability on their monthly mortgage payment or the overall costs they will they owe on their home loan, but some homeowners feel that there are benefits to using cash-out refinancing if certain conditions are met.
Homeowners do need to be sure that refinancing will be beneficial for their situation before even considering any type of refinancing activity, as there are homeowners who may meet closing costs that are much higher than the savings they stand to gain over a short period of time when refinancing due to the fact that they may not get a significant decrease in their mortgage rate or monthly payment. Also, homeowners who are not in a good financial position in terms of their credit score or their ability to meet certain closing costs that come with refinancing are obviously seen by many financial advisers as poor candidates for refinancing.
What is a Cash Out Refinance?
One type of refinance which is very popular for today’s mortgage holders is the “cash out” refinance, in which the borrower taps into the equity of the home to obtain cash. While not all lenders offer this type of refinance option, it is very useful for some borrowers who need access to cash for educational or medical needs, or wish to pay off high-interest bills.
Basically, a cash-out refinance allows the borrower to refinance more than the current principal balance of the mortgage and take the remainder of the loan in cash. There are variations on the way this type of loan is administered, but generally the money received is designated for a certain purpose.
What can I use the cash out for?
Some people utilize the cash-out refinance mortgage to pay off high-interest bills. By using the equity built in the home to pay off credit cards and other debts, the borrower can significantly lower his or her overall interest rate and keep monthly payments low.
Is it a good idea to cash out some of my home equity?
While this seems a good plan in theory, there are dangerous pitfalls to this approach. Many people borrow money on their mortgage to pay off high-interest credit cards, only to run the balances up on those same cards again. This causes them to have the high-interest debt along with a higher balance on their mortgage, which can lead to financial ruin. If you opt for a cash-out mortgage to pay off credit cards or other debts, the safest way to ensure that you do not run up your other debts again is to close those accounts.
Another purpose of the cash-out mortgage refinance is to provide cash for educational or medical expenses. These types of expenses can easily mount into thousands of dollars, so sometimes tapping the equity in the home is the easiest way to pay for them. However, there are other options for financing education, such as low-interest student loans, and many medical expenses can be negotiated or even written off if the income level of the patient is sufficiently low. Be sure to explore other options before you consider a cash-out refinance to pay for expensive educational or medical bills.
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How Soon Can I Take Out a Home Equity Loan or Refinance After a Cash Purchase of a Foreclosure?
The house is only 10k. So if I pay 10k cash, how fast can I do a home equity loan for that 10k? I need to make repairs as it is a foreclosure in poor condition. Can I do a refinance loan and get more than I even paid for it if it appraises higher than 10k, which it will? Thanks for any help
It all depends on the difference in the value of the place and the amount owed on the loan - that is what's considered your equity. Many banks will only loan up to about 80% of the equity, but a few go higher. For example, lets say you owe $50,000, but the place is worth $60,000, then you have $10,000 in equity. Take 80% of that and you have about $8,000 you could loan against.
I found a great article about it on
www.payoffmyloansnow.com
Home Equity Loan or Cash Out Refinance?
Any one know whats the difference and the pro and cons about Home Equity Loan and Cash Out Refinance? Which is better?
They’re both bad ideas. You want to owe as little as possible in comparison to your home’s value, anything you do to increase the amount you owe puts you in a a bad financial position. The biggest point to understand is that your home is not a bank, and should never be treated like one if you want to keep it.
A good number of the people losing their homes now took out these types of loans. Some of them had financial issues and couldn’t keep up with increased payments. Others just suddenly had to sell for various reasons. In either case, when selling was the only option, these people were in serious trouble because they didn’t have the equity to sell and pay the necessarily fees.
Think about it for a second: if you have to borrow to get access to this cash, where would you get money to make up that difference if you suddenly had to? Let’s say you owe $100,000 on a $130,000 home, and you cash out $20,000 (you probably can’t get 90% of your home’s value) so that you now owe $120,000. What if you suddenly had to put your home on the market tomorrow?
Let’s say you manage to sell the home for $130,000. If you make it through the sale without having to make any repairs to the house and you’re not paying any closing costs (all of which would be a miracle in a buyer’s market), at a 6% commission you’ll wind up with $2,220 left over. That’s a pretty narrow margin these days. If you had never treated your home like a bank, you’d have a cushion of $22,220 instead to make your sale happen.
No one ever thinks they might have to sell tomorrow, but many other people have been in that spot and learned the hard way that they were wrong. Unless you need the money in your home for something vital (like say a life saving operation), don’t touch it!
If you are happy with the rate on your first mortgage then a HELOC (home equity line of credit) might be the answer for you. There are a lot less costs involved with them.
Before running to your bank for the HELOC be aware that your credit needs to be near spotless these days to get a HELOC, and there has to be a substantial amount of equity in your home for the bank to open up a line of credit.
URGENT HELP NEEDED!!! What is the best source for a quick cash loan to refinance an overdrawn account?
Also, would it be okay to go to the same bank with the checking account (Bank of America) and ask for a cash loan. I need about $200, but I don't have much credit or a job at this point and the bank is going to close my account and report me to an account verification system in slightly less than a week if I don't fully repay them, which would seriously damage my financial future. I am looking to use excess student loan money to repay the cash loan. Any ideas would greatly be appreciated!!!
get a job!!!!!?
DO NOT get a payday loan or a quick loan to take care of this. You will end up spending more money than you want to to begin with. Talk to your bank and see if you can't come to some sort of agreement.
It sounds bad but when they check your credit they will not give you any money.
You might also try those cash till payday places, but usually those are a bad idea too, since you will still owe the money, plus interest.
Where can I get an auto refinance loan that will give me extra cash over and above the payoff for my car?
I want to do some extra work on my car to enhance it's value and condition, rather than just trade up. I like my car and I know what I've got into it already. I don't want to get another used car--something that I have to start all over learning about, in terms of its mechanical needs. I just want to make my current car better, with the extra cash imbedded in the refinance.
you can get cash above the payoff for your car if you have enough equity to meet the LTV guidelines for the bank, and still have room. Check with all the local banks to see what their guidelines are, and what they would lend on your car.
Can you refinance 100% loan-to-value in Texas, and cash out on the equity for home improvements?
Meaning, we owe $99K, can we refinance for $125K?
(to Amanda: 100% loan to value means getting a loan for 100% of the home's value. Just because you owe on a home doesn't mean you owe 100% of what it's worth.)
EDIT: If you really want to get technical Amanda, there is no "a" before 100%. So, it's clarified just fine. You read it wrong. No, I didn't ask if you could refinance a loan that is 100% of the value of my home. Go back and read again.
Texas state law says that the only way you can do a 100% on the first refinance after the purchase but the only way to do that is if you still owe 100% of what the house is worth because you can't get cash out. If you wanted to do cash out you could but you would not be able to go above 80% loan to value due to Texas state law.
EDITED TO ADD:
And I know what 100% Lown to value is. You said, "Can you refinance a 100% loan to value...." Which means that you have a 100% LTV that you want to refinance. So perhaps you need to be more clear if you expect a correct answer.
Yes, you can refinance from 90K to 125K if the home is valued at 125K, but your interest rate may be higher due to the risk and you may end up with PMI, which you probably dont have now. Just some things to consider.
www.totaldebtsolutionsllc.com
Loan officers in our network do loans in Texas all the time.
Can I refinance a loan with another bank to the original amount if I need extra cash?
I have a loan that is paid on diligently every month. It is secured by a cd of the original loan amount. I would like to refinance this loan to the amount of the original security, take the cash, and keep my original monthly payment
I don't see how you could because I would think the new bank would need to have the CD in their bank before they give you the secured loan. Obviously, you can't put the CD in another bank because it is being used as security for the original loan. Talk to you bank where the loan and CD is about refinancing.
If you obtained a cash out refinance what happens when it ends up in foreclosure?
Example: You refinance with $200,000 cash out & house appraises at $650,000. The loan is $520,000. Value of property drops to $450K so you can't refi; the cash has been spent & now it is going into foreclosure. What will bank do?
They go after your other assets, accounts, property and wages until you have repaid all of the money they gave you, interest on it and the legal expense of getting their funds returned to them.
Eventually you will pay them back.
It'll foreclose. It now owns the property, currently worth about $450,000.
It'll determine the value of the property through a BPO (broker's price opinion). It will then list the home with a Realtor, probably for a price around the BPO. Assuming your estimate is correct, the BPO would be around $450,000. Then, on a regular schedule, it'll drop the price of the home. For example, perhaps every 45 days it'll drop the price by $10,000. At some point, someone will come along and buy it.
As for the owner of the home, the foreclosure transfers ownership of the home. And it's a black mark on the owner's credit. Once the foreclosure occurs, the owner no longer has a right to live there, and must move.
From your point of view, you sold the house back to the bank for $450K and have cancelled debt income of $70K. You calculate your gain/loss on the property using the $450K number. You can have taxable income from both.
Which would be better...to refinance w/cash out or a home equity loan?
Here's the info. We want to put an addition onto our home. We purchased it new in 2002 for $119,000 and we borrowed $26,000 on our original loan which is a 5/1 ARM. In our current market area, our home would sell for between $150K and $160K. We will need $50K to do the addition. Which is the best route for us: to refinance and get the $50K or get a home equity loan or home equity Line-of-Credit? It's all confusing and I know there are pros and cons to each product. HELP!!!! Thanks in advance!
Sorry Frazure, but my debt load is minimal and my credit score is excellent...take your advertisment elsewhere.
I would get out of the ARM and get a fixed rate mortgage if I were able to get a decent rate. You will still have plenty of equity if you decide you need to get a home equity loan for something else later.
Cash-Out Refinance or Second Mortgage? If Second Mortgage...home equity loan or HELOC?
My 2-family home is valued at 375K. I have 12 years and 88K on it left. My current loan is at a 4.9 interest rate. I need to borrow 220K and need it in lump sum. With todays rates being around 6.5 for a 30 year, I know refinancing is out of the question. Which would be better for me, a HEL or a HELOC? What would my payments be for 30 years, 15 years? Thanks
look the best interest rate you will get is a fixed rate at 30 year if you can not afford this rate, you will get crushed with a home equity or other second note, they are variable and rates are not coming down but going up, after the teaser rate period is over you are going to get whacked almost double the payment, so when looking at a home equity read the fine print, see how long the teaser rate last and figure what ever your payment is double it once the teaser period is over
If I refinance with cash out can I just tak on the closing costs to the loan?
yes, however it will cause your intrest rate to recalculate.
cash out refinance loan - News
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How to Help Distressed Homeowners by Offering Free CMAs - RisMedia.com (press release) How to Help Distressed Homeowners by Offering Free CMAs Short refinance: Like a short sale, a short refinance (short refi) calls for the lender to accept less than the full balance due on the loan, |
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America's New Housing Problem: Unemployment - Forbes America's New Housing Problem: Unemployment While home prices were on the upswing, an unemployed borrower could sell the property or refinance, raising cash, but now, with property depreciating, |
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Will Any Other Republicans Support the Stimulus Deal? - Washington Post Will Any Other Republicans Support the Stimulus Deal? I took out 2 home equity loans one in 2003 and one in 2006 on top of the cash out refi in 2002 because a mortgage broker told me I could refinance out of |
As home equity declines, cash-out refinancing ebbs - Forbes
ReutersAs home equity declines, cash-out refinancing ebbs Sixty-two percent of all refinance loans in the quarter were cash-out refinances, meaning the new loan amounts were at least 5 percent higher than the Freddie Mac Increases Fees on Some Mortgages Freddie Mac hikes fees for certain mortgages
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DEAL WITH LIBERTY WILL KEEP SIRIUS XM FLYING - New York Post
Washington PostDEAL WITH LIBERTY WILL KEEP SIRIUS XM FLYING By PETER LAURIA John Malone's Liberty Media is expected to announce today a deal to provide a senior secured loan of between $250 million and $300 million Sirius Dogged By Debts
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