Cash Out Refinance Mortgage Loan – Resort For Greater Cash Help
Cash out refinance mortgage loan is an option for borrowers in need of cash to consolidate debt and pay for other expenses that the home owner has. They are using equity that is available in the borrower’s home as equity. All that a home owners needs to do is to borrow an amount up to the level of the equity in the home including any existing mortgage that is already in place against the home. The best way to illustrate how to obtain cash out when you refinance a mortgage loan works is to describe an example. We will use easy numbers to illustrate this concept. Your situation will be different and it will depend on your home’s value, the size of your existing mortgage, as well as your other debts and of course your income.
A Mortgage Refinance Example
Let’s assume that a homeowner owns a home that is worth $150,000. He or she has an existing mortgage on it and the remaining balance is $30,000 since he has owned the home for many years and has been steadily paying on the mortgage. The homeowner also has credit card debt of $10,000 and they want to complete a number of renovations to their home and then purchase some new furniture. In total for this work they need an additional $15,000. The total debt that is needed is $55,000. This is the existing mortgage, the credit card debt and the cost of renovations.
Paying down their credit cards will also decrease the total interest they are paying and decrease their monthly payments at the same time. Depending on the interest rate of the new refinanced mortgage, their monthly payments could even be less than what they are currently paying on the existing mortgage and the credit card even though their refinanced mortgage is higher.
The lender will request that the home be appraised to confirm the $150,000 value. Once this is completed the lender can then decide whether they should approve the mortgage based on the appraised value and the client’s credit rating and income levels. The old mortgage will be discharged and a new mortgage of $55,000 would be approved. The client must then pay out his credit card debt and use the remainder to pay for the renovations and furniture as previously discussed.
The lender will never approve a mortgage up to the total value of the home. Usually the lender will approve something in the order of 75% of the value of the home. The lender wants to ensure that the home owner still has valuable equity in the home and is motivated to meet the monthly payments. Home owners should note that many homes are not worth what they used to be due to the housing property decline over the past five years and you may not have as much equity in your home as you once did.
Brokers Can Assist in Finding the Best Refinance Mortgage Loan
Homeowners looking for cash out mortgage refinancing have several options when looking for this kind of financing. They can go to their existing mortgage holder to see what kind of terms and interest rate they might offer; then can look online for lenders or they can meet with various lenders at banks etc.; they can also use the services of a mortgage broker to help them find the best terms and interest rate for their new mortgage.
Brokers get paid finder’s fees from the lender when they bring them a qualified borrower. Their job is to stay knowledgeable about all of the latest offers that lenders have available at the lowest interest rates and terms. They connect borrowers with these lenders after reviewing their credit rating. They make sure that whatever criteria that the lender is looking for in a borrower is met by the client. Not all lenders have the same criteria. Their requirements vary a great deal depending on how much risk they want to take and how much money they are looking to make.
Clients and home owners can often save thousands of dollars over the life of a mortgage simply by obtaining a quarter point better interest rate, provided by a lender through a broker. They can save you money so consider using a broker to obtain cash out when refinancing a mortgage loan. If you are still uncertain about using a broker, we suggest that you ask for competing quotes on your cash out refinance mortgage loan from the broker and also from your bank that you deal with in addition to the current mortgage holder. Consumers can then select the one that makes the most sense for them based on interest rate offered, the term offered and the amortization schedule for the new mortgage. There may also be fees for appraisals for determining the value of the home as well as processing fees to consider.
Take the Time to Research Your Cash Out Mortgage Loan
Many consumers cannot even be bothered researching interest rates and asking for competing bids. Some will say it is too complicated or takes too much time to follow through or they just do not understand the process. It is just easier to approach their existing bank or mortgage holder and have them process the refinancing of their mortgage.
Any money that you save as a result of doing some of this work is money in your pocket. It is also after tax dollars so it is even more valuable. If you do not have the time or just find it all too complicated, and still want to get a better deal, the simple answer is to use a broker to find you the best mortgage terms and get your cash.
Once you have a proposal from the broker, take your proposal to competitor i.e. your bank to see what they can do for you. At the very least they will confirm that you have a good deal, at the very most they may be able to offer you a better deal. They may also point out some concerns they have with the mortgage terms which you should be aware of. Take the time to make yourself fully familiar with the mortgage proposal and always ask for more savings. You may not get what you want but then you never know. The worst that can happen is that they tell you that this offer is their best deal.