With home value continuing to appreciate, many homeowners now have a multitude of home equity in their current homes. This has opened up the opportunity for consumers to complete cash out refinances.
A cash out refinance can be used to not only receive cash back in hand, but also used to obtain funds to complete upgrades to your home, consolidate debt (including second mortgages) and pay for other unexpected expenses.
If you are thinking about a cash out refinance, there are many different home loan options to consider options.
In this article we will explore some of the more popular options for a cash out refinance loan. These include loan types, such as: Conventional, FHA, VA, and Jumbo loans. Let’s take a look at these options.
Option 1 – Conventional Home Loans:
You can complete a cash out refinance up to 80% of the value of your home, using a conventional home loan.
That means if you home is worth $400,000 today, you could take a loan up to $320,000 and receive equity back at closing or pay off other debt through the new loan.
In addition, on conventional loans, you may be able to potentially receive an appraisal waiver on a cash out refinance, if the new loan is no higher than 70% of the value of your home, when using a Fannie Mae backed conventional loan.
The conventional is a great option for a cash out refinance, as it does not require mortgage insurance and generally has a great rate associated with it.
Option 2 – FHA Home Loans:
FHA loans also allow cash out refinance loans up to 80% of the value of your home. However, FHA loans are a little more lenient on credit standards.
So, if you have less than perfect credit and want to complete a cash out refinance, then the FHA loan may be a good option.
FHA loans due have lower loan limits than conventional loans and also do have mortgage insurance associated with them, so they may not be the right fit for everyone.
Option 3 – VA Home Loans:
VA loans will allow for a cash out refinance up to 100% of the value of your home.
With almost all lenders, if you exceed 90% of the value of your home through a VA cash out refinance, you will pay a higher interest than a VA cash out home loan at less than 90% of value of your home.
In addition, all VA loans do not have mortgage insurance. However, unless you are exempt from the VA funding fee (due to a VA disability rating), then you will pay a VA funding fee when you complete a VA cash out refinance.
Option 4 – Jumbo Home Loans:
If you are looking for a loan above the Conventional and FHA loan limits, there are Jumbo home loan options as well, to complete a cash out refinance. The guidelines on Jumbo loans will vary from lender to lender, but some Jumbo loans may even allow for a cash out refinance up to 90% of the value of your home.
However, Jumbo home loans will require stricter credit standards and charge you a higher rate on a cash out refinance, the closer to 90% of the value of your home you go to.
Finally, there is also the consideration of just taking a standalone second mortgage, whether it be a home equity line of credit or a fixed rate second mortgage. While you may not want to keep that second mortgage for the long term, it may be the right interim option to pay off debt or fund a remodel of a home and then eventually consolidate that loan into a new first mortgage.
As always, it makes sense to speak to a licensed lender, such as Strategic Mortgage to fully qualify and see what home loan options are available to meet your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 703-5844 or by emailing: firstname.lastname@example.org or online at http://www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440