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Archive for Cash Out Refinancing

The U.S. economy has been fighting to escape the recession and the housing crisis has emerged as the National focus. Meanwhile the Obama Administration, the Federal Reserve and the entire mortgage industry have joined forces with record low refinance rates and aggressive home loan programs. Can these creative financial minds put an end to the unstable housing sector? Only time will tell, but we are giving these entities an “A” for effort.

This will be Remembered as the Era for Record Low Rate Mortgage Refinancing

The Mortgage Bankers Association announced earlier this month that 2012 has seen the lowest rates for mortgage refinancing since they have been keeping records.

The time for securing the best rate from a refinance loan has never been more right than today. Qualifying for these record low interest rates has been a challenge for many who have seen their incomes and credit scores fall in recent years.

The following refinance loans below have emerged as the leading refinance solutions in America at a time when finances are more important  than ever. The stakes are high for refinancing because many homeowners have an opportunity to save thousands of dollars a year.

1. HARP Refinance – The guidelines for the Home Affordable Refinance have seen drastic changes in 2012. Just try and stop these underwater borrowers from refinancing. Fannie Mae and Freddie Mac made the “loan to value” stipulations disappear for the first time ever.

2. FHA Streamline Refinance –The Federal Housing Administration nearly copied the refinance guidelines from Fannie and Freddie when the altered the home equity requirements to become a non-factor. No appraisal is needed now for existing FHA customers that seek to lower their interest rate through the streamline program. Another reason why the streamline has become so popular is that it is one of the few loans that do not require income documentation. Refinance lenders simply verify the borrower’s employment rather than examining their W2’s, pay-stubs and tax returns for income like most loans require.

3. Bad Credit Refinance –  The average credit score has plummeted in the last few years causing the demand for refinancing with bad credit to soar. Fortunately, Nationwide has become a subprime leader for refinancing. The VA continues to have no minimum credit score for borrowers seeking a refinance and FHA is only asking for a minimum credit score of 500.

4. Cash Out Refinance – With interest rates shattering record once again in 2012 it should come as no surprise that homeowners have been looking to get refinance and get cash out.  FHA allows cash back on 85% LTV refinancing and VA approved military borrowers to get cash back at 90% LTV. Conventional lenders have been requiring 80% LTV for borrowers that want money back and homeowners who are blessed with 20% home equity in their property continue to tap it because money is so cheap. Imagine how much money people are saving who are consolidating 20% credit card debt into a mortgage below 4 percent.

5. 30-Year Fixed Mortgage Refinance – With fixed 30-year rates available at 3.5% (APR 3.67%)  it makes sense that homeowners would migrate towards the most secure and affordable loan of all-time. With many refinance lenders easing the guidelines for the 30-year mortgage it has become a natural progression for new homeowners to refinance when the rates fall and the guidelines improve.

By now, most consumers understand that mortgage refinance loans cannot be this attractive forever. Expect to see interest rates jump when the housing crisis is visible in the rear-view mirror or if defaults begin to mount again. At the end of the day 2012 will be remembered for high unemployment and historic interest rate opportunities for mortgage refinance loans.

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In the end, only you can answer that question. However, there are some situations when cash refinancing makes sense. Some people have a second mortgage or a HELOC that has a higher interest rate. You can take money of refinancing your primary mortgage and pay off that 2nd mortgage or line of credit. You will get lower payments at a better interest rate. Not only that, you will have the full ability to claim the mortgage interest you pay on your income taxes. It offers many benefits when you use a cash out refinance to get rid of a second mortgage or an equity line of credit.

Some homeowners have accumulated a ton of debt from credit cards and car loans. If the amount of your debt payments is overwhelming you, using a refinance to get money makes sense. It will help you consolidate your debts into a single payment that is lower than what you are paying now. You will be in a better financial position in this situation. However, it comes with a big caveat. Many take the opportunity to clear their slate with cash refinancing. However, if you go back to spending money like crazy, you are defeating the purpose.

A medical emergency is another reason. Some people find themselves in a situation where they need cash in hand to pay for a critical medical procedure. Medical insurance will cover only certain procedures. In addition, even with insurance, there can be large co-pays and coinsurance requirements that can overwhelm you easily in the financial arena. Using a cash out refinance is one way to clear up that cash deficit. Now, a plastic surgery procedure usually does not qualify as a medical emergency, but again it is completely up to you.

Look at the reality of taking out a fixed rate 30-year mortgage on a short term purchase. Do you want to pay for the next thirty years on a vacation you take and forget about? Do you want to pay for that high end sports car for thirty years but only drive for maybe three or four years? Use a cash out refinancing for the right reasons. It is the responsible thing to do with your mortgage and for your financial future. You can make a real difference in your present financial position with a cash refinancing. However, make sure you do not end up in the same position again. You will not be a happy person.

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Millions of homeowners have benefited significantly by remodeling their house that was financed by a tax deductible home improvement loan.  Remodeling and redecorating living space is a favorite interest of many home owners. Not only does it provide an enjoyable way to pass the time, but it can improve the value for an investment property. Getting cash with a home improvement loan is an effective use of services offered by lending agencies. The increased value in a home can offset any interest payments that may be realized as a result of the loan. Another possibility is the determination if cash out loan packages from a refinance mortgage can provide the needed funds to begin the renovation project. This can be useful if the house needs repairs and the family is getting ready to place the property on the market.

For a major remodeling project, getting cash with a home improvement loan makes the most financial sense. Instead of using personal savings from a retirement account and risk losing out on long term gains, an equity loan is a better financial move. You must make a decision between a home equity line of credit and a fixed home equity loan.  A credit line is a flexible source that borrowers only pay interest on when they actually use the funds, but the interest is variable.  The home equity loan is a lump sum loan that disperses all of the funds when the loan closes, but the interest rate is fixed. The value of the dollar associated with a home equity loan will lessen the financial impact for long range planning. This is an easy way to acquire the needed funding resources to being the construction project without disruption of a robust savings plan. The interest rates associated with these types of loans equate to better use of investment funds.

Remodeling Can Increase the Value of a Home

The effort that goes into a home remodeling project can be time consuming and encompassing. To ensure that needed resources are available for unexpected situations, getting cash with a home improvement loan is an effective way to react to these circumstances. Finding a financing option with a low rate credit line will limit the impact that an unplanned occurrence will have a bearing on a tight project deadline. In an effect to keep tasks on track, the acquisition of these additional funds will prevent any undue delays in completing the renovation in the time required.

There are many options to consider when getting cash with a home improvement loan. Not only is it important to review the history and reputation of the lending company, but the decision to either choose between lump-sum equity loan or flexible line of credit packages is a prerequisite. Carefully plan the requirements of the project before making any financial commitments. This will help realize the best options to finance home remodeling and most effective use of available funds. A successful remodeling project will improve the living conditions of the property as well as leave the owner in better financial shape. Take a few minutes and complete the form for a free lender quote so you can get financing advice from a loan professional at Nationwide.

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Jan
19

Refinance or Second Mortgage?

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One of the most common questions I get from consumer looking for cash is whether they need a refinance loan or to take out a second mortgage.  Every situation is different, so there is not a simple “canned answer” when it comes to cash refinancing.  In order to offer educated advice on a first or second loan I need to understand the big picture.  In an effort to responsibly address this financing scenario, I need answers to the following questions below:

What’s your loan to value (LTV)? We need to determine how much equity you have because you may not be eligible for a credit line or second mortgage.

How is your credit? Whether your fico score is 580, 680 or 780 this will enable me to understand further what cash out options are available to you. Cash out refinancing guidelines range from 75 to 90% loan to value depending upon what type of borrower you are.  It also matters how big the “mortgage loan” is that you plan to take out.  Some lenders will allow good credit borrowers to go to 90% LTV on a credit line or fixed home equity loan if it is only for $35,000.

Do you have pre-payment penalty on your first mortgage?  Sometimes borrowers will have pre-payment penalties that equate to thousands of dollars. When a homeowner has a large pre-pay on their existing mortgage, it can make a second mortgage option more attractive.

What are you doing with money?  It is important to know why you are considering a cash back refinance. For example if you are consolidating debt then we would always recommend a fixed rate loan that featured simple interest.  Whereas, if you are remodeling your home and you are not sure how much cash you will be borrowing or when you will need the money, then a home equity line of credit may be the perfect solution.

Do you have a second mortgage or equity loan already? If you already have a “2nd mortgage”, we will have to refinance it and roll the balance into the new loan.

Interest rates remain at record lows and the guidelines for cash out financing appear to be expanding a bit in 2013, but it is important that you discuss you goals and situation with an experienced loan officer so you can make the best financial decision. If property values rise like they are predicted, you can expect to see more home equity products that provide cash back for homeowners.

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Many homeowners have learned the hard way that a home equity loan refinance can be complicated. Unfortunately the guidelines changed dramatically on equity loans when property values began to plummet.

Before the sub-prime mortgage crash in 2006 millions of Americans took out home equity loans between 2000 and 2005.  At the time it was easy to take out a second mortgage.  Most borrowers were able to qualify for an equity loan, whether they had good or bad credit and equity or no equity. Basically borrowers with poor credit and good qualify for a 100% home equity loan.  Many of these borrowers defaulted on these loans, but many of these borrowers continued to make their home equity loan payment and find themselves stuck with a 2nd mortgage.  Since then, interest rates have fallen to record levels, home values have depreciated nationally and home equity loan refinance guidelines have tightened significantly.  In 2011, lending rules for home refinancing have become more complex.

When borrowers took out their equity loans, property values were rising so it was easy to roll the 2nd mortgage into a 1st mortgage. It was also easy for a home equity loan refinance because lenders had access to many 2nd loan products. When the default rates increased and property values decreased, these home equity refinancing options disappeared.

  1. Maintain a good credit – Having high credit scores will always give you more options and the best opportunity for a home equity loan refinance.
  2. Consolidate your equity loan – If you are under 97% loan to value, there is a good chance you may qualify for a FHA refinance that enables you to consolidate your equity loan into a low rate 1st mortgage.
  3. Negotiate paying off your 2nd mortgage – Chances are your home equity lender will entertain a discounted buy-out of your equity loan. Since the default rate is so high, lenders are accepting pennies on the dollar for borrowers will to pay off their equity loan or line of credit.
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Nov
04

Cash Out Refinancing Tips

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A few years ago when a homeowner needed cash out they would just get a second mortgage or a home equity line of credit.  Most homeowners already had a first mortgage at or below the market so it made little sense to refinance their entire mortgage to get an additional $20,000 or $30,000.  Refinance loan programs have been consolidated in recent years, so it is imperative  that you work with a lender like Nationwide who know the refi game backwards and forwards. You see, 1st and 2nd refinance programs have seen many changes with more equity and high credit scores being the trend.

Get Cash Out with a 1st or 2nd Mortgage Refinance

Time have changed… Home loan rates continue to break records, so even if you refinanced last year, chances are that could get a home loan with a lower interest rate. The other reason that mortgage refinancing for cash makes sense is that qualifying for a home equity loan is more difficult in today’s market and home equity lenders are requiring more equity for second mortgage loan eligibility.  Clearly cash out refinance loans have become a commodity.

Here’s how it breaks down:

  • FHA Refinancing with cash out up to 85% Loan to Value
  • VA Mortgage Loans enable cash back up to 90% LTV
  • Conventional Home Loans allow cash out up to 80% LTV
  • Jumbo Mortgages Allow cash out up to 75%  LTV’
  • Home Equity Loans allow cash back from 70-90% LTV depending credit scores
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One of the best benefits of being a homeowner is getting the opportunity to get cash out.  Borrowers can choose from a home equity loan or a cash out refinance loan.  The home equity loan is a second mortgage lien and the cash out refinance is redoing your first mortgage.  If a homeowner already has a low fixed rate mortgage at 5% or lower than an equity loan can be appealing because it allows you to get a cash out second mortgage without touching the mortgage you already have.  If a borrower has an interest rate above 5% and/or it’s not a fixed rate mortgage, then cash out refinancing is an ideal opportunity for borrowers to reduce their interest rate while getting access to cash.

The fees and closing costs on refinance loans are typically higher than home equity loans, but in today’s competitive market you may be able to qualify for a low closing cost home loan, so discuss your options with your lender prior to jumping to conclusions. Another appealing option is the home equity line of credit.  Like the home equity loan, it is a second mortgage, but with an equity line you only pay interest on the portion you access.  So if you are doing a remodeling project that may take a year or two then, the home equity line might be the best solution.  If you are taking out cash to consolidate debt then, a fixed rate home equity loan would make sense over a credit line, because the interest rate is fixed and the terms are set.

When looking at cash out loan guidelines for home equity and refinance loans, the following applies:  FHA refinancing allows first mortgage refinancing with cash out options up to 85% loan to value.  Conventional refinance loans enable borrowers to finance up 80% loan to value and VA refinancing enable veterans to get cash out up to 90%.  Home equity lenders offer cash out loans and lines from 75 – 90% loan to value, but the credit scores must be excellent to qualify.  The other factor to remember is that since equity loans are second mortgages, you have to calculate your present loan plus the second loan amount, divided by the appraised value to calculate your combine loan to value.

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