Do you need cash? Here’s a mortgage for you. If you are not in a good position to take an equity line of credit on your home, because you have not built enough equity or a poor credit situation is making bankers steer clear of you, altogether, there is another option — the cashout refinance.
This loan does what the equity line does in most cases, but it is not an interest-only loan, and it has conventional mortgage terms. The advantage for people without enough equity and less than perfect credit is you can get at what little equity you do have by refinancing to a new conventional mortgage, taking cash out at the close of the loan.
Here’s how it works.
Let’s assume you have a home valued at $110,000. You owe $86,000, and you would like to get $8,000 in cash to pay off two small credit cards with high interest and to do some minor rehab work on you home. With your B credit rating, banks won’t give you 100 percent of your equity or even 95 percent, so an equity line won’t work.
However, you will qualify for a 90 percent cashout refinance loan. In order to keep your costs down, you combine this strategy with another one, an adjustable rate mortgage, and this helps you maintain a low monthly payment.
You need about $4,000 to close the loan (remember it’s a conventional mortgage with all the closing costs — equity loans can be closed with no costs at all). The closing costs, though, will be financed into your new loan, so you don’t have to come out of pocket with any money.
So, you get a new mortgage for $99,000, which pays off your old fixed rate mortgage loan, covers the closing costs and, best of all, leaves you with $9,000 in cash — $1,000 more than you actually need.
The ARM rate is probably one percent less than your old fixed rate, so your payment will stay close to what it was. Plus, you eliminate monthly credit debt, so you have created even more cash! This is just an overview of a very powerful loan.
By: Mark Barnes
Posts Tagged ‘Fixed Rate Mortgage Loan’
Which Refinance Mortgage Loan Deals Are Easy to Process?
December 24th, 2009
So you want a finger in that refinance mortgage loan. After all, it’s fast becoming the talk of the town. The problem is, you’re daunted by the process that comes with it. Now you’re wondering, what are the easiest deals to come by so far?
You might want to consider the many types of refinance mortgage. They are by far the simplest and easiest to process.
Fixed Rate Refinance
As opposed to the specialty type (like adjustable rate mortgage), this type of loan is much easier to come by. To qualify for an adjustable rate, you will have to meet up with generally higher standards. You will have to have a higher income, better credit reports, and a more valuable home equity.
A fixed rate mortgage loan may be just what you need. With this type of refinance loan, you deal with a fixed interest rate for the whole credit term, as opposed to an adjustable mortgage interest rate wherein you are subject to the inconsistencies of the market. If the economy is not in good shape, then you’ll have to prepare yourself for burgeoning interest rates. So basically, you get peace of mind and stability with the loan as bonus.
Closed Refinance
Another type of refinance that is easy to qualify for is the closed refinance mortgage loan. Now what is this? It’s the type of loan wherein you are not allowed to make prepayments or to pay off your loan in advance. You may want to do prepayments if you suddenly find yourself with a lot of extra cash and with the desire to pay out your loan to avoid interest fees. With a closed mortgage loan, your lender will only allow you to do this for a fee.
It’s much easier to close this kind of deal, though, as opposed to an open refinance mortgage. The latter allows you to pay out without fees, but it’s not easy to qualify for them. You will have to have a more inviting income, credit report, and home equity.
Long Term Refinance
Another refinance mortgage loan that is easier to qualify for is the long-term loan. Now what would make for a long-term loan? It’s the type of loan that lasts for 6 years or more. It usually lasts for up to 10 years, though there are those that reach until 25 years.
Short-term are more advantageous in that they offer lower rates. But then again, they are not easy to come by. Yet again, you will have to have better income, better credit reports, and better home equity.
But the qualification process may just be the least of your worries. Getting a deal closed and getting just the right deal are two different things. You may have gotten your refinance mortgage without much sweat, only to encounter serious problems when you are already in it. Do not go for a deal only for its expediency. Be very scrutinizing.
By: Rony Walker