Freddie Mac Cash-Out Refinance Guidelines On Conventional Loans
This BLOG On Freddie Mac Cash-Out Refinance Guidelines On Conventional Loans Was PUBLISHED On April 22nd, 2019
Freddie Mac Cash-Out Refinance Guidelines allow a limited amount of cash to be taken out on a limited rate and term refinance on conventional loans.
- Per Freddie Mac Cash-Out Refinance Guidelines, borrowers can get up to 1.0% of the mortgage loan amount and/or $2,000, whichever is less, on a rate and term conventional refinance mortgage loan
- Freddie Mac Cash-Out Refinance Guidelines on limited rate and term mortgages is different than a full Conventional Cash-Out Refinance
- There is no limit on the amount of cash-out that can be taken out up to 80% Loan-To-Value (LTV) on a full cash-out refinance mortgage
- With a full Freddie Mac Cash-Out Refinance Mortgage, borrowers can take out up to 80% LTV of their property’s appraised value
In this blog, we will discuss Freddie Mac Cash-Out Refinance Guidelines on limited rate and term conventional refinance mortgages.
Freddie Mac Cash-Out Refinance On Rate And Term Loans
This new Cash-Out Refinance Guideline applies to rate and term refinance conventional loans.
- This is different than the standard full Freddie Mac Cash-Out Refinance up to 80% LTV
- It is a limited cash-out available on rate and term conventional loans
- Many homeowners are taking advantage of the lower mortgage rates to refinance their current home loans
- Other with FHA Loans are refinancing to Conventional Loans to get rid of their hefty 0.85% annual FHA Mortgage Insurance Premiums
- Recent changes in tax laws no longer allow homeowners to exempt second mortgages
- With Fannie Mae, the maximum amount of limited cash-back on rate and term refinances is 2% of the total mortgage loan balance or $2,000, whichever is less
Here is a flow chart:
Here is the potential change in max cash out on the two ways:Loan Amount Fannie Mae Freddie$60,000 $1,200 $2,000$80,000 $1,600 $2,000$100,000 $2,000 $2,000$200,000 $2,000 $2,000$300,000 $2,000 $3,000$400,000 $2,000 $4,000$453,100 $2,000 $4,531
Net Tangible Benefit With Refinancing
Many homeowners do not realize how much their home values have increased in the past few years.
- The Federal Housing Finance Agency (FHFA) has increased conventional loan limits for the past three years due to rising home prices
- FHFA increased conforming loan limits to $484,350
- HUD, the parent of FHA, also increased FHA Loan Limits for the past three years due to rising home values. FHA Loan Limits for 2019 is capped at $314,827
With rising home values, many homeowners with FHA Loans can benefit from refinancing to conventional loans and avoid paying Private Mortgage Insurance (PMI). Homeowners who have benefited from their home values can see if they still require Private Mortgage Insurance. Private Mortgage Insurance on conventional loans is automatically removed when a homeowner hits a 78% Loan-To-Value of the scheduled amortization plan. It is not exempt if the homeowner pays down the balance to meet the 78% LTV sooner than the scheduled term.
Here are the other terms of removing private mortgage insurance:
Borrower requested (original value) – Most often occurs when a borrower pays down a balance faster than scheduled and requests PMI to be removed based on the value used at closing.
Borrower requested (new value) – Occurs when a borrower requests PMI removal based on a new appraised value, and the loan has been open for at least two years.