Refinance/Debt Consolidation

Rate/Term refinancing is when you payoff your existing mortgage with a new one to reduce your interest rate, reduce the remaining term of your existing mortgage, or to turn your mortgage into a fixed rate from an adjustable rate or visa versa. You could be adding escrows or removing escrows from your payment. Whatever the reason for the rate/term refinance, the basic component is that you are not taking any cash out of the equity of the property, just renegotiating your existing term with a new mortgage.

Cash out refinancing is when you are using equity in the property to payoff bills, buy a new car, add an addition to the property etc. When doing so, many factors come into play as different loan options create different opportunities. Paying off multiple credit cards can save hundreds of dollars per month and if the debt is not “racked” back up, the monthly savings can be used to pay down the mortgage in a faster fashion.

(Consultation is necessary with any financing in determining what should and shouldn’t be paid off with a mortgage loan. Continually refinancing to pull cash out will eventually lead to no equity in the property and a much higher overall mortgage payment.)

Conventional Financing - Credit scores determine how much of the value you may borrow. The better the score, the more LTV (Loan to Value) you may go. 80-90% of value is maximum cash out allowed in conventional financing, normally. Debt to Income Ratios vary, but usually don’t exceed 38/46.

FHA Financing - Allows you to go as high as 95% cash out. This is extremely beneficial for those with less equity in their properties or an abundant amount of debt to pay off. It also allows more cash out for upgrades to the property if needed. FHA is more lenient and will allow cash out to 95% with lates on your credit profile. Lates on the mortgage in the last 12 months are not allowed if you wish to go to the maximum of 95%.

Documentation:

  • 2yrs. job history
  • 2yrs. mortgage history
  • Property tax bill
  • Homeowner’s Insurance Policy
  • Assets to show 3-6 months mtg. payments in reserves(most cases)
  • Cash out over 80% LTV will generally require Mtg. insurance (MI)