What are the guidelines for refinancing cash payments to homeowners

Cash-Out Refinance Mortgage Guidelines For Homeowners

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Cash-Out Refinance Mortgage Guidelines For Homeowners Was UPDATED And PUBLISHED On May 28th, 2020

Cash-Out Refinance Mortgage Guidelines
Gustan Cho Associates

Homeowners with equity in their homes and overwhelmed with debt can consider cash-out refinance mortgage as a potential solution in overcoming high debt. Homeowners can do anything they want with the proceeds from a cash-out refinance mortgage.

The following can be paid with a cash-out refinance mortgage:

  • auto payments
  • student loans
  • second mortgage
  • credit cards

In this article, we will discuss and cover Cash-Out Refinance Mortgage Guidelines For Homeowners.

Proceeds From The  Cash-Out Refinance

Any proceeds from the cash-out refinance is tax free. Borrowers do not have to pay any taxes from the cash-out refinance proceeds. Proceeds can also be used for the following:

  • Home renovations
  • Elderly care
  • Vacations
  • Second-home purchase
  • Investments
  • Other needs

Homeowners with equity, a cash-out refinance mortgage loan will probably the quickest and easiest fix to overcoming high debt.

Reduced Monthly Payments With Cash-Out Refinance

Housing prices have been increasing in the past few years. In some areas, housing values appreciated double digits. Cash-Out Refinance Mortgage Guidelines For Homeowners require homeowners have equity in their homes with the exception of VA Home Loans.

  • Many homeowners who have purchased their homes in the past few years do not realize that the value of their homes has skyrocketed
  • Many areas in Texas, Georgia, DC, Utah, Alabama, Kansas, Missouri, Tennessee, Florida, Illinois, California, Wisconsin, Washington, Indiana, and many other states have more home buyer demands than inventory
  • A cash-out refinance mortgage loan can be a solution to those who are overwhelmed with high monthly payments
  • With the excess cash from the refinance mortgage loan they can pay off all or most of their credit card balances, car loan, and other monthly installment loans
  • Even if the homeowner gets the same interest rate or slightly higher interest on the refinance mortgage loan, the new payment may be slightly higher
  • But their overall monthly payment will be lower because the new refinance mortgage loan is amortized over 30 years (today’s mortgage rate ) versus the 20 plus percent credit companies charge and the short term amortization car loan finance charge
  • Most car loans are amortized over 3 to 5 years
  • Interest rates on car loans are north of 6 plus percent

Coming Out Ahead With Refinance Mortgage Loan

Which means getting out of refinancing your mortgage

Per Cash-Out Refinance Mortgage Guidelines, homeowners can do whatever they like with the proceeds of their refinance. There are ways homeowners can do a refinance mortgage loan and get cashback to solve overcoming high debt and come out ahead. All debts get paid off and homeowners eliminate most other monthly debt and keep the same mortgage payment as before. Or mortgage payment is slightly higher where it will not make a dent with finances.

  • Homeowners can get a lower interest rate on a cash-out refinance mortgage loan to pay off outstanding debt and reduce substantial monthly debt
  • For example, case scenario:
    • $200,000 mortgage balance at an interest rate of 5.75% on 30-year term mortgage
    • current principal and interest payment on your current loan will be $1,167.15
    • The homeowner needs $30,000 cash from cash-out refinance mortgage to pay off $15,000 in credit card debt and $15,000 auto loan
    • Do a $230,000 cash-out refinance mortgage with a new 30 year fixed rate loan at 4.25% interest rate
    • new monthly mortgage payment will be $1,131.46 per month

Case Scenario On Refinance Mortgage

Say on the above case scenario that automobile loan monthly payment was $400 per month and minimum credit card payments were $600 per month.

  • By refinancing and paying off an auto loan and credit cards, homeowners will be saving over $1,000 per month. Mortgage payments can be lower than what it used to be even with a $30,000 larger balance

Cash-Out Refinance Mortgage Guidelines Per Loan Programs

In order to qualify for cash-out refinance mortgages, homeowners need equity in their homes. The amount of cash-out allowed depends on the particular loan program. Mortgage Rates on cash-out refinance mortgages are higher than rate and term refinances:

Here are the Cash-Out Refinance Mortgage Guidelines For Homeowners:

  • VA Home Loans allows up to 100% Loan To Value on cash-out refinance mortgages
  • FHA allows up to 85% LTV

Fannie Mae and Freddie Mac allow up to 80% LTV on cash-out refinance mortgages.

Finding A Lender With No Overlays On Cash-Out Refinance Mortgage Guidelines

How to find a lender with no overlays when paying out

Homeowners who need to qualify for a cash-out refinance mortgage with a direct lender with no mortgage overlays please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We have no mortgage lender overlays on FHA, VA, USDA, and Conventional Loans. We are also experts on non-QM loans and bank statement loans for self-employed borrowers. We are available 7 days a week, evenings, weekends, and holidays. There is no waiting period after the housing event to qualify for non-QM loans. There are no private mortgage insurance requirements on NON-QM Loans and Bank Statement Loans for self-employed borrowers. 10% to 20% down payment is required on a home purchase. The amount of down payment required depends on borrowers’ credit scores.

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