11 Jan Cash out refinance, california cash out, mortgage cash out, cash out refinancing, cash out refinancing
any homeowners have occasions that arise when they need to get hold of some extra money quickly. Such a situation may arise if you want to do some home decorating; or it may be the case that you want to finance your child’s college education; even still, you may feel yourself overburdened with short-term debt, like your credit cards, and you want to find a quick solution to this. At times like these your financial advisor may suggest to you a number of ways that you can finance these urgent money needs. One suggestion might be that you take out a personal loan. Another may be that you think of a second mortgage. However, as a homeowner, it’s likely that your financial advisor will suggest cash out refinancing as an option you may want to consider. So, exactly what is “cash out refinancing”, and: is this a sensible way to solve your short-term money needs?
Cash out refinancing
is a refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
100% Cash out refinancing
100% Cash Out Refinancing is like any normal refinancing transaction but you get 100% cash out refinancing instead of 70% or 80% of your home equity. Most people don’t know about 100% Cash out refinancing so they keep getting 70% or 80% of the value of their house because they think that they need to have a 15, 20 or 30% of equity in their home. However, 100% cash out refinancing is ONLY suitable for those borrowers who burred with other bills such as high credit/debts cards, several car loans and many others monthly payments.
Cash out and None cash out refinancing
No matter what your credit is as long as above 500, homeowners find great rates for home refinancing, second mortgage, debt consolidation or home improvement. With the lowest mortgage rates in over 40 years, the refinance boom is still very much ongoing. At New World Mortgage we recognize the refinance process can be confusing due to the difficulty of mortgage programs options offered in today’s marketplace. We research continuously for new loan products that best suited your need and bring you the best refinance and purchase loan products available. We are here to share with you all the refinancing programs out there so that you can make the decision that’s right for you.
When interest rates are low, refinancing your mortgage could reduce your monthly home payments and free up cash to pay higher-interest debts or other expenses.
The truth is you can get cash out refinancing and paying off all your high interest credit/debt cards and save $400 or $500 each month on your monthly bills! Mortgage lenders realize that it’s hard for homeowners to have many bills beside their mortgage payment. That’s why they offer up to 100% cash out financing option so that those whom burred with bills can get relieved. Not every bank or lending company offers cash out refinancing but it’s pretty easy to find those that do. Here’s how it works: When you apply for cash out refinancing you are asking for what lenders call a “piggyback” or 80/20 loan or sometimes 100% one loan. It depends on your credit. On 80/20 loan which is a cash out refinancing loan is amounts to receiving a first and a second mortgage at the same time. The first mortgage covers 80% of the home’s value while the second mortgage covers the remaining 20%. When you add them up you’ve got 100% cash out financing!
Cash Out Refinance
– What Is It?
Many homeowners have occasions that arise when they need to get hold of some extra money quickly. Such a situation may arise if you want to do some home decorating; or it may be the case that you want to finance your child’s college education; even still, you may feel yourself overburdened with short-term debt, like your credit cards, and you want to find a quick solution to this. At times like these your financial advisor may suggest to you a number of ways that you can finance these urgent money needs. One suggestion might be that you take out a personal loan. Another may be that you think of a second mortgage. However, as a homeowner, it’s likely that your financial advisor will suggest cash out refinance as an option you may want to consider. So, exactly what is “cash out refinance”, and: is this a sensible way to solve your short-term money needs?
Cash Out Refinance
As its name suggests, “cash out refinance” is a financing arrangement where the amount of money you receive from new financing exceeds the amount of your outstanding debt. So, for example, say you have a house that is worth $150,000, but where the outstanding mortgage is only $100,000. You need to borrow $30,000 to pay for your child’s college education – but you don’t want a personal loan because the financing costs are too high. In this case you can consider (a) applying for a second mortgage for the $30,000; or (b) doing a refinance where you ask a lender to lend you $130,000, in return for which you’ll give the lender a mortgage over your house. Should the lender lend you the money, you repay your existing $100,000 mortgage loan and pocket the $30,000 to pay for your child’s college education. The second of these two scenarios is a cash out refinance scheme.
Why Would I Want To Consider Cash Out Refinance?
Most of the realistic reasons why homeowners want to consider a cash out refinance have already been mentioned – like to pay for a child’s college education, or to do some home decorating. However, one reason why more and more homeowners are considering cash out refinance as a financing option, regardless of whether or not they have an immediate cash need, has something to do with a three-letter word – tax.
As a homeowner, with an outstanding mortgage loan, the interest part of your home mortgage loan repayments are tax deductible against your income. However, if you no longer have a home mortgage loan: you no longer have any entitlement to claim for a tax reduction of your income tax based on your home mortgage repayments. For this reason, it becomes lucrative and financially rewarding for those with money, as well as those without, to consider a cash out refinance option every now and then so that they can maintain their income tax reduction entitlement.
Having said that: sadly the older you get the less likely it is that you’ll be able to obtain a mortgage over any significant period of time; say 10 to 20 years. So, if you are close to your 50s, in the prime of your career earnings, coming near to the end of your mortgage repayments, this is exactly the time when you could do with a tax reduction – but you’re just about to lose it! In such an event, you should have considered a cash out refinance option in your mid-40s, before it was too late, taken the holiday of a life-time, and then used the increased mortgage on your house as a tax reduction on your future earnings!
In short then, homeowners may want to consider a cash out refinance option to:
* pay for their child’s education; * consolidate their debt; * do home improvements; * use it as a tax avoidance scheme. Are There Any Issues To Be Aware Of?
Yes; because of its very nature, applying for cash out refinance can take some time. For example, to do cash out refinance you need to have your house’s value appraised by an appraiser (of your lender’s choosing) to determine that the house’s value is indeed the same as what you say it is in your mortgage loan application form. You also need to repay your existing lender, then arrange the mortgage for your new lender. This will all take time. Consequently, whilst cash out refinance is a superb option available to homeowners, it can rarely be used if your financial needs, as a borrower, are immediate.
Also, when considering the cash out refinance option, you do need to give considerable thought to what fees and costs your existing lender may charge you. It’s very common to find, in mortgage loan agreements, terms that penalize borrowers if they try and make a full repayment before the completion of their existing mortgage loan – so check this out!
Any Other Consideration If I want to Do Cash Out Refinance?
Yes; as mentioned cash out refinance is an excellent option – but you do need to consider some issues, as follows:
* Will my new lender penalize me if I do another cash out refinance in a few years time?
* What interest rate am I really paying? – check the Annual Percentage Rate (APR); * What fees will I need to pay? – like application fees; appraisal fees; etc.;
* How soon will I need the money – and is a cash out refinance going to give me the money soon enough?
* Are there any restrictive covenants, in the new home mortgage loan agreement, meaning I cannot do what I want with the house? * Is there not a cheaper way of financing the borrowing? * Are my monthly repayments going to be higher or lower than they already are?
* Can I refinance against the whole appraisal value? – the answer here is likely to be “no”. In most cases your refinance lender will only allow you the opportunity to refinance up to 80 percent of the appraised value of the house – not 100 percent. In this regard, cash out refinance is very similar in nature to a mortgage agreement – part equity / part debt borrowing.
And so, if you’re looking to repay your outstanding personal loan, put your children through school, or even pay for that second home near the beach, a cash out refinance may be the best, and most sensible, option available to you!
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