Cash-Out Refinance

Offers Flexibility to Existing Homeowners

A cash-out refinance loan is a great refinance option for borrowers looking to convert their home equity into cash.  A cash-out refinance replaces a borrowers’ current mortgage with a larger loan and uses the home’s equity to provide additional funds for other purposes.
For example: A homeowner who owes $50,000 on a home valued at $250,000 has $200,000 in equity. A cash-out refinance would liquidate some of the equity by refinancing with a new loan amount greater than $50,000. The additional funds on this loan (after fees and closing costs) would be given to the borrower in cash.
A cash-out refinance differs from a home equity loan because a refinance replaces the current loan with a larger one, where a home equity loan is an additional loan (subordinate to your first mortgage). Interest rates are typically lower on a cash-out refinance than a home equity loan.

Requirements & Eligible Loan Programs

Both FHA and conventional loan programs allow the cash-out refinance option. FHA allows cash-out refinance on primary residence only, and conventional allows it for all occupancy types. In addition to the loan program requirements, cash-out refinance loans also require:

  • A new appraisal and inspection report
  • The borrower must be on the title to the subject property for at least six months prior to the note date of the cash-out refinance.

Additional fees may also be required based on a borrowers’ loan-to-value.

Reasons to Cash-Out Refinance

There are many reasons borrowers opt for a cash-out refinance. Some of these include:

 

  • Debt consolidation
  • Home improvements
  • Reducing a rate and monthly payment while getting additional cash
  • Paying off a purchase money junior lien used for any purpose
  • Paying off a leasehold interest
  • Buy out the equity of an ex-spouse, joint heir, etc.

Is Cash-Out Refinance Right for You?

It’s smart to look at your current mortgage and mortgage rates. Are rates higher now than when you initially got your mortgage? Are you close to paying off your mortgage? If so, a cash-out refinance may not be the best option for you.
Additionally, it’s smart to consider your current financial situation. The total amount of equity a borrower is allowed to withdraw in a cash-out refinance is based on factors including the value of the home and the borrowers’ current financial situation. Borrowers with a higher credit score, less debt and a higher home equity are likely to pay smaller closing fees than those with a poor credit score and low equity.
Lastly, if you do decide to get a cash-out refinance, pay close attention to the housing market and be smart about the amount of equity you choose to withdraw. Borrowers can run the risk of going underwater on their mortgage if their home price declines – taking out too much equity and having a home’s real estate value drop can be a crippling combination.
That being said, cash-out refinancing is a great option for borrowers who have high interest rates, or are looking for funds to make significant home improvements or consolidate debt.

Step 1. Get Pre-Approved.

How Does Pre-Approval Work?

Getting pre-approved is as easy as 1-2-3!

1. Create an Account

Creating an account is fast, easy, secure and FREE! Your account enables you to easily modify your loan application and view the status of your loan anytime day or night.

2. Submit Information

When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely.

3. Get Pre-Approved

Kick your feet up while we crunch the numbers. Pre-approval can be done very quickly if you provide a complete and accurate loan application and supporting documentation.


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