Cash-Out Refinance Explained
Cash-out refinances can be great for someone who needs extra money for a home renovation, or to pay off some higher interest debt. like a normal refinance, you’re replacing your current mortgage with a new one, possibly at a lower rate.
But unlike a standard refinance, you expand the loan amount and get the difference in cash. This differs from a home equity loan, or a home equity line of credit because instead of having a second mortgage, it’s all rolled into one loan.
Because cash out refinances don’t only need to be used for home renovations, they can be a great option over other renovation refinances, such as 203k’s, if you have the equity. Now let’s talk about requirements. Cash out refinanaces can’t exceed 80% of the loan-to-value of your home.
That means that if your home is appraised for $250,000, The most you could get the loan for is $200,000. If, in that circumstance, you only owed $100,000 on the house, you could take the remaining $100,000 of equity out through a cash out refinance. In order to qualify for a cash out refinance, you also must have a credit score of at least 620, and a debt-to-income ratio under 45%.
There’s also an updated home appraisal needed in order to qualify for a cash out refinance. So to sum it all up, cash out refinances can be a great option for anyone looking to make home improvements, pay down higher-interest debt, or even reinvest their money. To learn more about cash out refinances, and for other mortgage resources.
Cash Out Refinance How they work
Lots of exciting things and one of the main ones being how do you save tons of money and maybe consolidate some of your other debt? Stay tuned, because I’m gonna go through all of that with you. (bright engaging music) I wanna take a moment to say thank you so much to all our veterans, I love VA loans, they’re my favorite. I feel like it’s the least that I can do to give back to thank you for your service and the sacrifices you make, as well as the sacrifices of your family.
What is a VA cash out refinance? It might be a little bit different than you think. It actually falls under two categories. The first category being the one that you’re expecting, if you’re taking cash out and not just paying off your mortgage, that’s what we know about cash out refinances.
But did you know that a cash out VA refinance is also when you’re paying off a mortgage only, but a mortgage that is not currently a VA loan.
So if you’re looking to refinance from your conventional FHA, whatever you pick it, from a current loan that’s non VA into a VA, you’re actually considered to be doing a VA cash out refinance.
What are some of the benefits of cashing out with your VA refinance? Well, if you’re doing another type of loan that involves mortgage insurance, if you’re paying that monthly, how nice would it be to refinance to a VA loan with a lower interest rate and also drop that monthly mortgage insurance? That would be a great way to save automatically even if you’re not getting cash back at closing.
Some of the things that you can use your VA cash-out refinance for, if you want to do more than just pay off your current mortgage would be maybe you want to consolidate some debt, maybe you want to consolidate some high interest loans.
There of course are pros and cons to this such as, you don’t wanna take a loan that might have five years left on it and refinance it for 30 years, if you plan to have the new mortgage for 30 years, but maybe if you plan to sell your house in the next three to five years, then it might not be so bad to take up an installment loan, that could be a $400 monthly payment and a 7% interest rate, and go ahead and consolidate that into your VA loan with a crazy low interest rate, like they are right now.
You’d save money monthly and you’d save money in the long-term as well, because you’ll be paying it off in full in the three to five years anyway. Here’s a great example. I just had some consumers yesterday that were actually looking to refinance and they were going to put more money in their pockets and not pay off their automobile. They didn’t even think about paying off their automobile which was at a 13% interest rate.
I couldn’t even believe it, 13% interest rate at around a $400 monthly payment. Well, they could borrow a little bit more on their mortgage and knock that out instead of worrying about borrowing less than on their mortgage so that their payment was, let’s see what it might’ve been 13,000, 30-year loan, they were at a 2.75 interest rate, $53 a month it was going to cost them in their mortgage, or 450 something dollars in that auto loan.
That’s just one of the probably several examples of things that you can use your cash out VA refinance to consolidate debt and put yourself in a better short-term and long-term position.
I want to decipher the difference between a VA cash-out, which we just explained and a VA streamline also called an IRRRL, I-R-R-R-L, interest rate reduction loan basically. The difference with an IRRRL as I’ll refer to it is you’re literally just paying off your VA current mortgage not a different type, but your current VA mortgage. If you only have one mortgage, not multiple and you were just paying off that mortgage, roll it in your closing costs and prepaid, and you don’t even need an appraisal for that option.
You’re not going to get any cashback at closing. But, it’s fantastic if we can reduce that interest rate and save yourself tons of money, either monthly or long-term, so short-term, or long-term. Just want to point out those differences between the true cash out and the actual streamline, or IRRRL. The other thing I wanted to talk about today was the costs involved.
The costs are going to vary from lender to lender, yes, but I want to at least give you some reference points. If you’re doing the cash out, which is what we’re going to talk about now, so you can check that one out later for the cost involved in that one, but for the cash out today, where we’re either pulling cash and/or paying off a non-VA loan.
The costs involved in that would be number one an appraisal. Appraisals do also vary from area to area and lender to lender, I would say a good reference point might be about $500. So, you can expect to have that cost involved in your VA refinance. You’re most likely also going to have a title company. They’re gonna charge their fees. They’re gonna to charge cancellation of the current mortgage.
They’re gonna charge the recordation of new mortgage, that has a lot to do with your loan amount, so not including title insurance because that is really hard to calculate, I’ll give you a reference point, but just talking about maybe recordation, cancellation, title fees, maybe that’s five to $700, and of course, you’ve got your title insurance on top of that.
Then the other piece that you’re gonna have is you’re going to have your closing costs such as you might be paying for a credit report, an administration fee, you might be paying for an underwriting fee, lenders call them different things, and I have seen lender fees range from zero all the way up to several 1000 dollars, just to give you a reference point for that as well. Last but not least, and I don’t like to call it a cost because I don’t believe it to be a cost, but that would be to set up your new escrow account.
Most lenders will not allow an escrow account transfer, which means your new loan will start a whole new escrow account, maybe you’ll get a refund of your current escrow account about 45 days after this new closing. I don’t like to call it a cost because think about it this way, even if you have no mortgage do you pay home insurance? You should and you probably do. And even if you have no mortgage, do you have property taxes? Absolutely.
So, those aren’t necessarily costs, but it feels like it because you’re starting a new escrow account and that includes some cushions required to make sure that the account can handle some ebbs and flows. Those are the things that you can think about when it comes to the costs involved or surrounding your cash out VA loan. The last thing I’m gonna talk about today are the myths surrounding VA loans. I want this to be so clear because our veterans have sacrificed so much and you deserve everything that you have earned.
A lot of the myths are things such as you can’t refinance to a VA loan when you’re not currently in a VA loan. That is not true. Another one that I hear a lot is that if you’re purchasing, we’re talking about myths, if you’re purchasing a home and financing via VA that they will finance your closing costs and prepaids.
They will not. You can try and negotiate with the seller to help you with that, but you have to come up with that money if not. They don’t cover your closing and prepaids, although they will finance you 100% if you’re eligible.
Another huge myth that I’m hearing all of the time is that you can only use your VA benefit once, and that’s absolutely not true and breaks my heart because it’s such a good loan and you should not be missing out on that. There’s actually not a limit to how many times that you can use your VA benefit to get yourself a VA loan.
And last but not least, one of the other big myths I hear is that you can only have one VA loan at a time. Surprisingly, that is also not true. It depends on your eligibility, but I’ve known of veterans actually have as many as four loans at once. Again, depends on your eligibility and a number of factors but that’s another big myth that hopefully we can bust today.
I hope that this is helpful for you today when we’re talking here about VA and we’re talking about cash out. Remember, you deserve and have earned these benefits. So always look into your VA loan, even if you think it’s maybe not the way that you’re going to go.
Cash-out refinance texas rates
- Conventional 30 Year Fixed. 3.875% 3.959%
- VA 30 Year Fixed. 3.125% 3.568%
- FHA 30 Year Fixed. 2.875% 3.809%
Texas cash out refinance fee limit
In Texas, the maximum loan amount of any owner-occupied cash–out refinance loan cannot exceed 80% of the property value or loan-to-value (LTV).
Texas cash-out refinance rates today
Today’s 30-year fixed rate: Current rates in Texas are 3.25% for a 30-year fixed, 2.50% for a 15-year fixed, and 2.75% for a 5/1 adjustable-rate mortgage (ARM).
Texas cash-out refinance calculator
Cash Out Mortgage Refinancing Calculator to help you determine how much you can cash out and what your new mortgage payment will be after refinancing. cash-out refinance can come in handy for home improvements or paying off debt. A cash-out refi often has a lower rate than a home equity loan
Texas section 50(a)(6) refinance eligibility matrix
A Texas Section 50(a)(6) loan is a loan originated following and secured by a lien permitted under the provisions of Article XVI, Section 50(a)(6), of the Texas Constitution, which allow a borrower to take equity out of a homestead property under certain conditions. Texas Section 50(a)(6) loans eligible
- first liens only;
- fixed-rate mortgages; and
- certain five-, seven-, and ten-year ARM plans (shown in the table below).
|Eligible ARM Plans|
|Five-year ARMs||Seven-year ARMs||Ten-year ARMs|
Not eligible as Texas Section 50(a)(6) loans:
- loans that are not in the first-lien position,
- ARM plans not listed in the Eligible ARM Plans table above, and
- loans with temporary interest rate buydowns.
Texas cash out refinance investment property
A Cash Out Home Equity Loan for your investment property at any time. The Texas Constitution Home Equity laws do not place any restrictions on loans on investment property so the rule that says that you can only get a Texas Cash Out Home Equity Loan one time per year does not apply.
Texas rate and term refinance cash back
Rate/Term Finance Requirements The loan is rate/term refinance if the first mortgage is paid off is a Texas 50 (a)(6) loan and the borrower is not getting any cashback. No cash back to the borrower.
Cash-out refinance texas credit score
A Texas cash–out refinance loan is also called a Section 50(a)(6) loan. With this option, you refinance your current mortgage while also tapping into your home’s equity.
|Texas Cash Out|
|Minimum FICO Credit Score||620|
|Maximum Loan To Value||80%|
|Maximum Debt To Income||45%*|
Our mortgage lending today I will speak regarding cash robbery finance on non-owner-occupied properties in the state of Texas. it is more challenging than other states to do a cash-out refinance however if you are not occupying the home the loan is at least $100,000 or more we can do the financing and get you to cash out. we can go to 80% of our value in most cities and counties however in Houston.