I blogged last week about the importance of liquidity, and as a result we received several inquiries in regard to cash out mortgages (even though that was not the intent of the blog).
One of the inquiries was from a real estate agent who wants to make sure she is liquid enough to snap up bargain properties (like she did in 2010) and to weather a loss of income should a downturn come.
My discussion with her prompted this blog.
As a reminder, here are a few of the reasons why borrowers might want to consider taking cash out of their properties:
- To weather economic downturns, especially for those in sales;
- To cover unexpected expenses like medical or legal bills; and
- To buy assets at bargain prices when they bottom out.
Here are a few reasons why taking cash out sooner rather than later is prudent:
- Rates will almost certainly climb. If borrowers wait, their rates will likely be much higher next year, as the Fed plans to continue to push up rates.
- Values often drop during downturns, sharply reducing the amount of equity borrowers can tap into.
- Incomes often drop during downturns. When incomes drop, it is often much harder or impossible to qualify for a desired mortgage.
Fannie Mae allows cash out loans up to 80% of the value of a primary residence, and up to 75% of the value of a single-family investment property.
Borrowers with real estate might want to get cash now before the gettin’ gets worse.
Founder/Broker | JVM Lending
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