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What is a cash out refinance mortgage?

It is best understood after a basics in mortgage math (don't get worried the math is real simple) The cash out refinance equation: home current value - current mortgage owed = available equity. So lets put that equation to use. If you current home is worth 200,000 and you owe 120,000 , so 200,000 - 120,000 = 80,000 is equity. You have available $80,000 in equity. This money is sitting in the value of your home and it may be borrowed against. The new loan that pays off the current mortgage balance and gives you the remaining cash is called a cash out refinance mortgage.

Now, Cash out refinance mortgages, there are some rules.

Many standard conventional mortgages and government back mortgages such as FHA and Va will limit how high of a LTV (loan to value *) you can borrow doing a cash out refinance. A simple rule is 80% LTV or less you are mostly likely  not going to run into any issues. As the LTV of cash out gets higher there becomes more restrictions and insurance requirements on the loan. The majority of loan products will not allow for a cash out of over 95% LTV.

What can the cash out refinance be used for?

Of course the first item that the cash out refinance will pay off will be the current mortgages, Usually the new loan will require all mortgages be closed. This means seconds and equity loans/lines also.

After the loans are paid off the cash may be used to pay off debt, make home improvements, pay for college, get a car or even plain old cash in hand. When paying of debts the lender usually requires 'pay off statements' prior to closing and may require 'pay off satisfied statements' at post closings.

Get cash from your equity. Sometimes you may even save money by doing a cash out refinance, When paying off debts the total monthly payments you make may go down after they are all consolidated in the new loan. Although you may be getting a greater loan amount in your new cash out refinance the term may be extended or the rate lowered and the mortgage payment may go down. Also the cash out refinance may place debts that where previously non - deductible into a tax deductible situation, this may save you money and increase income.

A Cash Out Refinance Mortgage is simply just a mortgage used which is used to extract additional equity from the home, Complete our mortgage rate request form on our home page and find out mortgage information regarding cash out refinancing.

  * LTV loan to value refers to the percentage amount of loan (money borrowed) to the value of the property, if the property's value is 120,000 and you owe 70,000 your LTV is (70,00/120,000 = .58) 58% LTV.

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