Your Complete Guide to the Cash-out Refinance Home Loan
- SECTION 1What is a CASH-OUT REFINANCE Loan?
- SECTION 2Am I Eligible for a CASH-OUT REFINANCE Loan?
- SECTION 3CASH-OUT REFINANCE Loan Benefits
- SECTION 4CASH-OUT REFINANCE Loan Rates
- SECTION 5First-Time Homebuyers
- SECTION 6CASH-OUT REFINANCE CASH-OUT REFINANCE Loans
- SECTION 7Refinancing with a CASH-OUT REFINANCE Loan
- SECTION 8Contract Guidelines
- SECTION 9The CASH-OUT REFINANCE Loan Process
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What is a Cash-out Refinance Loan?
Video: The Cash-out refinance Loan Process
A cash-out refinance is a mortgage-refinancing option in which an old mortgage is replaced by a new one with a larger amount than owed on the previously existing loan, helping borrowers use their home mortgage to get some cash. With a cash-out refinance, you're getting a new home loan for more than you currently owe on your house. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash, which you can spend on home improvements, debt consolidation or other financial needs. However, you'll now be repaying a larger loan with different terms, so it's important to weigh the pros and cons before committing to a cash-out refi. The important thing to remember when dealing with a cash-out loan is that most traditional loans offer this option for a refinance so the terms and requirements might be different.
If you're ready to start your Cash-out refinance loan, check your eligibility or have specific questions on the Cash-out refinance loan, talk with a Orbit Home Loans specialist today.
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How Do Cash-Out Refinance Loans Work?
Cash-out refinancing work like this: Your Orbit Home Loan mortgage broker (Mortgage Banker) works on your behalf to qualify you with the most competitive lenders in the nation. Cash-out refinancing home mortgages are typically lent out with 15 or 30 year repayment periods; the one that’s right for you depends on your personal finances, your income, and the interest rate you can secure. Once you are qualified, completed the process and have purchased the property your lender will sell your loan to corresponding agency depending on the type of loan you get: VA, Conventional, FHA, USDA, Etc.
Interest is the percentage rate you pay to the lender and then to the corresponding agency for the trouble of lending you money. This is how the corresponding agency makes money from having lent you such a large sum. Interest rates are either fixed or adjustable and interest rates normally adjust daily but can adjust multiple times a day. The interest rate you receive on a conventional loan will also vary based on your own personal financial profile.
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Exploring the Cash-out Refinance Loan
Cash-out Refinance Loan
A cash out refinance is when you take out a new home loan for more money than what you owe on your current loan and receive the difference in cash. For example, if your home is worth $300,000 and you owe $200,000, you have $100,000 in equity. With cash out refinancing, you could receive a portion of this equity in cash. If you wanted to take out $40,000 in cash, this amount would be added to the principal of your new home loan. In this example, the principal on your new mortgage after the cash out refinance would be $240,000.
What are Cash-out refinance loan limits?
The conforming loan limit is designated by county. Most counties are assigned the baseline conforming loan limit. However, there can be variations on the conforming loan limit based on regional economic differences.
What is The Cash-out Refinance Funding Fee?
If you borrow more than 80% of your home's value, you'll have to pay for private mortgage insurance. For example, if your home is valued at $200,000 and you refinance for more than $160,000, you’ll probably have to pay PMI. Private mortgage insurance typically costs from 0.55% to 2.25% of your loan amount each year. PMI of 1% on a $180,000 mortgage would cost $1,800 per year.
Is the Cash-out Refinance Loan a Good Option?
In the real estate world, refinancing in general is a popular process for replacing an existing mortgage with a new one that typically extends terms to the borrower that are more favorable. By refinancing a mortgage, you may be able to decrease your monthly mortgage payments, negotiate a lower interest rate, renegotiate the periodic loan terms, remove or add borrowers from the loan obligation, and potentially access cash.
KEY TAKEAWAYS
- In a cash-out refinance, a new mortgage is for more than your previous mortgage balance, and the difference is paid to you in cash.
- You usually pay a higher interest rate or more points on a cash-out refinance mortgage compared to a rate-and-term refinance, in which a mortgage amount stays the same.
- A lender will determine how much cash you can receive with a cash-out refinancing, based on bank standards, your property’s loan-to-value (LTV) ratio, and your credit profile.
Refinancing your mortgage can be a great way to reduce one of your largest monthly expenses. Savvy investors watching the credit market over time will typically jump at the chance to refinance when lending rates are falling toward new lows. Mortgage contracts may have terms specifying when and if a mortgage borrower can refinance their mortgage loan. There can be a variety of different types of options for refinancing.
How do I Get a Cash-out Refinance Loan?
Talk with a trusted lender that knows Cash-out refinance loans and how to get the most from this hard-earned benefit. The process typically starts with getting preapproved, which can often be done in minutes using your phone, laptop or tablet.
Loan preapproval is a key first step before making an offer on your dream home. Having that preapproval letter gives you a clear sense of your buying power and shows sellers and listing agents you have what it takes to get to closing.
Start my Cash-out refinance loan with Orbit Home Loans -- the Nation's #1 Cash-out refinance purchase lender
If I’ve previously used a Cash-out refinance loan, can Cash-out refinance loan benefit, it's yours for life. You can reuse the Cash-out refinance loan over and over again, and it's even possible to have more than one active Cash-out refinance loan at the same time.
Continue to learn more about Cash-out refinance loan eligibility in our next section.