Need Cash Out? How Much You Can Get

What’s a cash out refinance? Quite simply, a cash out refinance is when you finance the equity you have in your home with a long term mortgage, not an equity line of credit. This is typically done by paying off your existing mortgage balance with a new loan that’s greater than the loan amount you are paying off and your proceeds are greater than $2,000.

With the Fed continuing to raise interest rates, short term loans like home equity lines of credit are directly affected and have become a less desirable option if you’re in need of some cash. The equity in your home is just sitting there, so a cash out refinance is a great way to put that equity to work. Whether you want to pay off some debt, help fund your child’s education, do some home renovations or consolidate your home equity line with your current mortgage, a cash out refinance might be a great option for you.

Let’s look the max loan-to-value (LTV) for a cash out refinance on conforming-conventional and government loans:

How It Works

Here’s an example of how a cash out refinance works for an owner occupied single family home. Let’s say you have a $200,000 loan balance and your home appraises out for $300,000. Since we can take the new loan to 85% of the value, we can pay off your existing $200,000 with a new $255,000 mortgage, giving you $55,000 in proceeds.

Consolidating Current First Mortgage and Home Equity Line

Let’s say you currently have a first mortgage as well as a home equity line of credit. You’ve probably noticed that your rate & payment has been going up on the equity line. Does it make sense to consolidate both loans, especially if you have a great interest rate on your current first mortgage? It depends on what the blended rate between both loans are versus what the new rate will be on the new consolidation loan. Most home equity line rates are structured around the Prime Rate. As Prime continues to rise, so does your blended rate. So even if your current first mortgage rate is lower than the rate on a new cash out refinance, it might still be worth consolidating to a new loan with a rate lower than your current blended rate.

I am happy to run scenarios for you and determine what options might be best for your specific scenario. Don’t hesitate to call or message me for a free consultation. My goal is to help you maximize your balance sheet but also find the right loan structure that fits your current and future goals.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735