Do you want to do some upgrades to your home? Do you have some expenses you need to figure out how to pay for? Is it time to consider a cash out refinance? With the increase in home values in the last couple of years, many home owners have more equity in their homes. For some, it may be worth looking into a cash out refinance.
When you refinance and pull additional equity out of your home, it’s called a cash out refinance. Typically you can mortgage up to 80% of the value of your home with a conventional cash out refinance. So if you have a home worth $300,000 and your current mortgage is $150,000, you would be able to get up to about $90,000 in equity. This is money you could use towards home improvements or maybe an investment – it’s up to you. You want to make sure it makes sense to do this – think about how long you plan to live in the home, whether you can afford it and what you want to do with the money.
Conventional loans will allow for a maximum mortgage of 80% of your value, FHA mortgages will allow you to get up to 85% of the value of your home. VA loans will allow cash out refinances up to 100% of the value of your home. FHA mortgages will have mortgage insurance – conventional loans will not. VA loans will require a VA funding fee of 3.3% that can be added to your mortgage, but not a monthly fee. If you have a VA related disability, the VA funding fee may be waived.
Should you consider a refinance? Think about how long you will be in your home, what is your current interest rate and what type of loan do you have now. If you have an adjustable rate, it may make sense to refinance – even if you don’t want to take cash out. If you have a low interest rate, you may want to think about a home equity loan or a second mortgage rather than losing your low interest rate. If you currently have an FHA mortgage but have enough equity to take out the cash you want and still have enough equity to eliminate mortgage insurance, it may make sense to refinance.
Talk to your loan officer and maybe your financial planner to get an idea of what makes the most sense. Your situation may be different – maybe it makes sense to refi, maybe it doesn’t. But with home values increasing and interest rates increasing, this fall may be a great time to consider a cash out refinance! That way you can take advantage of the increased equity in your home before rates go up much higher!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
