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Are Cash Out Refinances A Good Idea?

A mother sends her child off to school that she was able to pay for with funds from a cash out refinance.

When homeowners purchase a new home, they instantly start to accumulate equity in their new home. For some homeowners, taking cash out from their home equity can be a great way to pay off credit card bills, purchase a new home, pay for college, or invest in home improvement projects.

HOW DO CASH OUT REFINANCES WORK

Homeowners can use a cash out refinance to increase their loan amount, without incurring additional “cash out” charges, as long as the extra funds go towards the closing costs.

In California, homeowners are allowed to get the lesser of $2,000 or 1% of the loan amount as “cash” and avoid “cash out” charges.

In Texas, homeowners are not allowed to get any cash back.

Cash out refinances are limited to 80% loan-to-value ratios.

FIND OUT IF YOU SHOULD REFINANCE

For example, if a homeowner’s property is worth $600,000 and the current mortgage is $300,000 – homeowners can access an additional $150,000 – $180,000 in cash (depending on the lender’s requirements).

HOW SOON HOMEOWNERS GET A CASH OUT REFINANCE

Almost all loans have Early Pay Off Penalties for lenders when loans are paid off before their “seasoning requirements.” Lenders can get hit with massive fines of $10,000+ whenever a loan is paid off or refinanced under six months. Hence, JVM Lending asks all of our new homeowners to wait at least six months after the close of escrow to pursue a cash out refinance.

CHECK OUT JVM LENDING’S RATES

At JVM Lending, our Mortgage Analysts can lock in a new interest rate and refinance as soon as four months after the close of escrow (with a sixty-day lock). But, lenders cannot fund the refinance until the 180-day mark to avoid the EPO penalty.

QUESTIONS ABOUT CASH OUT REFINANCES?

If you are considering a refinance or would like to learn more about cash-out refinances, our Mortgage Analysts are available 7-days a week to answer any questions. Contact our expert team by phone at (855) 855-4491 or by email at jvmteam@jvmlending.com.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167