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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FHA Mortgage Loans with Cash Out Refinancing
Nationwide Mortgage Loans provides low rate FHA loans with Cash Out refinancing options for borrowers looking to raise capital and consolidate ...
where can I find the current rate for cash out FHA refinance?
We live in Suffolk County, NY. We have excellent credit and no debt. I want to double check that the broker is getting us the best rate.
Wow, I didn't even realize they were doing FHA cash out refinances these days.
Conventional rates are easy to check at Bankrate.com. Don't know about FHA.
Can you still refinance with cash out if your home has been off the market more then 3 months. ?
I have a balloon payment coming up in Sept 09 and would like to refinance with cash out. The bank told me cash out at 80% of LTV and at least 3 months off the market. Now they are changing there tune. They said that since the house has not been off the market for more then 6 months they have to drop my LTV to 70% are they legally aloud to change there tune after I have payed my lock in rate fees and signed paper work.
If you read your agreement, you will undoubtedly see that they have included language along the lines of "the bank has the right to change these (the refinance rules) conditions from time to time with proper notice."
In effect, what you signed gave you the right to refinance under certain conditions, but those conditions can change somewhat.
If you applied with a big bank you are stuck with their guide lines and they can change them at anytime. What usually happens when you have your loan locked and the guide lines change is you are given a specific time frame that you must close and fund the loan under the old guide lines but that is up to the individual lenders.
how many people on here need to refinance there homes for a lower monthly paymnt, cash out or to pay off bills
refinance. cash out, lower payments, lower interest rates
oh screw off.
If you can't afford to pay for an ad why would anyone want to deal with you?
Some people talk about pulling $$$ out of a home after it increases in value with a refinance.How does it work
Ok Guys, Im new to this whole home buying thing, but I just have a question because I hear about it all the time. When someone refinance a house after a few years, they get a lower rate and they have amassed a good amount of equity both from paying the mortgage and from increases in home value. If they refinance, how do they pull out cash from the refinance and still maintain the same payment, sometimes lower?
Lets take this scenario: $620000 home. $400000 mortgage for 30 years @ 6.5%. After ten years the home increases to $1000000 and balance on mortgage is $340000. Lets say after the refinance the rate is 5%. I know the new payment for another 30 years would be $1825/mo but "how and what would they be able to pull out"?
Can anyone explain (in lamens terms)? thanks so much!
Well. There are a few questions that I think you are trying to figure out here. 1-what a refinance is and what they talk about when they mention the word refinance 2-what will you be able and how to pull out of the re-fi.
*A refinance is essentially a re-structuring or if you wish, taking on a brand new mortgage arrangement different from your present one. Typically, people refinance for getting MORE money out of their house through the HIGHER mortgage due to increase in the value of their property. In you case, you are at ~66% loan to value of your house (forgive decimals...), that is you ALREADY have 100-66%=34% of equity in your house. With your house price going up to 1Mill and the mortgage balance being at 340,000, your equity increases to 66%, i.e. reverse of what you have now except that you now "OWN MORE" of your house than before. Here we are logically arriving at answering question number 2, i.e.
**Should you property increase in value to 1 Mill and your mrtg balance being at 340K, you can go back up to the Loan to Value that you currently have, that is to 34% of equity in the house. So, doing simple arithmetic: A/34%*1Mill=340,000. B/1 Mill-340,000=660,000. This is the amount you can refinance to and "pull out" 660,000-340,000(mrtg balance then)=320,000. Your 320,000 will be your new money you could potentially invest into another property. The only caveat that you should be carefuly here is the potentially (!) lower rate on a re-fi. Yes, if rates go down in the market and you are able to fetch an awesome broker's deal, then possibly you might end up with 5%. Again, typically, on an INcrease to your mortgage balance (remember: you were at 340K and now at 660K), the rate may be blended between what you have NOW and what the new rate on a new mrtg term and balance gonna be. It is highly probable your rate will be either:
A/ lower than 6.5% now IF rates go down and you are able to find a better deal at the lower rate then
B/blended HIGHER if the new rate on the new funds to be added is generally higher due to market conditions
C/ blended LOWER if the new rate on the new funds to be added is generally lower due to market conditions
Anyhow, you need to do some shopping and what I call "thorough explanation meetings" with those people you are going to talk to regarding your new 660K mortgage then. Who knows, eh?
You pull the money out on the new 660K mortgage by simply getting a new type of a mortgage when the old one will be paid off (with a balance of 340K) and the DIFFERENCE will be simply deposited (by the new lender providing the new 660K mortgage) to your bank account.
Uff, I even got tired typing all of this fo ryou...Hope that helps...:-)
Can I refinance with a big cash out if I'm in between jobs?
My home is valued at 365K. I have 88K of the original loan left on the house. I'd like to refinance the balance and take a cash out in the amount of 190K on top of it. I have excellent credit but I'm currently in between my old job (been there 5 years, resigned last week) and a new job (starting in a week). Our (wife and I) annual income is 126K. My questions are: Can I do this while in between jobs? Will I have trouble getting approved for a new 30 year loan at a good rate? Will they care about what I do with the extra money or ask why I need it? (Repaying a personal debt to family member).
If you have an agreement that you are hired by the new company and it is doing the same line of work, then you will not have a problem. By the time the refinance is ready to close, especially if you are only one week away from starting the new job, you will be working and hopefully you may have even received your first pay check by then as well.
1. Yes you can do this in between jobs for the reasons and explanation mentioned above. You will need to document you have been hired by a new company and possibly that it is in the same line of work.
2. As long as you keep your LTV below 80% you will be able to get a good rate. If you keep your LTV at or below 70% then you will be able to get a slightly better rate. For an LTVat 70%, you would need to cut your cash out by about $22,500.
3. The lender will ask what you plan to do with the extra money. Simply tell them it is for personal reasons.
Best of luck.
Since the application process is going to take more than a week, the mortgage company will be able to verify your new employment in the process. The only issue will be if your home appraise for what you think it will. Remember, most bank appraisers are much more conservative than realtors. You are looking at pulling a loan at 80% of value. That is a key threshold for banks. If the appraisal comes in at $340k, be prepared for the bank to require either PMI (mortgage insurance) or a loan at $272K max
Fact. Most likely you do not need to do this but just want to. Unless it is definately for advancement in business then I would not recomend it. Live well below your income and then hae something later.
Refinanced mortgage, if cash is taken out is the rate different?
Eg. I want to refinance a 155K mortgage and 30K equity line into 185K fixed mortgage. If I take out 50K cash too, is the APR on the 50K cash the same as the 185 fixed mortgage?
Yes, a cash out transaction has a higher cost than a rate & term, or purchase.
Also: If that 30k equity line was taken out after the purchase and thus was not used to originally acquire the property, combining those loans into one new one is a cash out transaction even without the extra 50k.
in any event, your rate will be higher because of the cash out unless you at 70% LTV or less
LTV = $185,000/your value
Make sure to price out your loan with your LOCAL banks and mortgage brokers only.
A lot people giving advice on here are also looking to give you a loan (its not advice, its advertising), if they are not local to you and you can’t get to them within 1 hour don’t fall for it. They say they are licensed in all 50 states, what does that mean? Which state do you have to look in first if something goes wrong? KEEP IT LOCAL; DON'T GET RIPPED-OFF BY SOMEONE IN WHO KNOWS WHERE WHICH YOU WOULD HAVE NO DIRECT ACCESS TO.
Remember Buddha's advice:
"Believe nothing, no matter where you read it or who has said it, not even if I have said it, unless it agrees with your own reason and your own common sense." You are the only "expert" you can trust: All brokers, and every other loan officer guru giving advice here with a .com or contact me at the end is "selling" you something (its not advice, its advertising). Don't buy "it."
Should we refinance with the new interest rates?
We have a 6.5% 30y fixed interest rate, a $964 house payment which we have had no trouble paying monthly, owe $115,000 on a $150k appraisal....have no intention of moving. We are comsidering refinancing to cash out and do some home improvements like new windows (much needed) and doors, and insulating our crawl space. Is this a good idea? This would be the 2nd time refinancing in the 7 years we have been here.
If you can get a lower rate then 6.5% I would say go ahead and refinance. If not, get a Home Equity Line of credit. With this you only pay for what you use. The rate could be as low as Prime - 1%. So in reality over the next month you could be at a rate as low as 4.25%.
If you can get a lower rate without paying points, then it probably makes sense. If you can't refi, consider getting a home equity line of credit to fund the windows.
if i take out a home equity loan now will this loan affect me if i want to refinance my mortgage.?
I have 24 years left on 30 year mortgage. I am thinking about a home equity loan at a favorable rate, rather than roll in to refinance consolidation. If rates are favorable later this year i may like to refinance 1st mortgage at 15 years. Will home equity loan affect my refinancing even if i am not looking for any cash out.
Right now rates are LOW, I would just refi instead of the HELOC that might cost you 7% on up. Why pay for 2 transactions.
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
Are there benefits to refinancing while taking cash out?
I refinance I would reduce my monthly payment by 160$, some of that is removing PMI and some is a better rate. at the same time I was going to take 5K out to payoff CC bills. I figure by doing this I could free up appx. 413$ a month total. I only plan to be in the home for another 2.5 yrs and my closing costs are going to be around $1000.00.
So my current payment of 920 which includes PMI, would be reduced to 757 with a 5000 cash out.
So does it make sense (I'm in about 5000 CC debt at about 250 min. payment a month). Any help is appreciated.
As long as your true closing costs are $1000 it would be beneficial. Were you told that your closing costs are only $1000 or have you seen actual paper work that says they are $1000.
Considering that you only plan to be in that house for another 2.5 years, you would not break even on the costs if the closing costs are more than $4890.
I do not count the savings on your credit card because unless you change your spending habits, you are most likely to continue to use the card, so that is not a guarantee savings.
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