AL and FL Mortgage News

Maximum Residential Cash-Out Options

August 20th, 2018 9:53 AM by Devin Murray

 

Last Updated August 2018

With real estate markets all over Florida and Alabama recovering (and yes booming in many markets) homeowners are more interested in home values and potential equity options than they have been in over a decade.  Some owners are selling to capture their equity and move on while others are staying put and borrowing against their newfound equity while rates are still relatively low.  While we will save how cash-out loans differ from other options for future discussion, knowing general options available to you in the mortgage credit market today can give you a great starting point in smarter decision making.

As a rule of thumb, the market for fixed rate second mortgages and HELOCs with banks and credit unions will allow you to capture up to 90% of the current market value of your primary home.  Most lenders will want to see a 680 or 700 score as a benchmark to allow the full 90% and even with great to excellent credit most will stop at 85% for second homes and 80% for investment properties.  Currently we do not offer junior lien products for cash-out refinances but either product can be very helpful depending on your scenario and what your purpose is for the equity.  Since there is no blanket answer to all possible scenarios, know that second mortgages and HELOCs traditionally have lower closing costs and can close in a handful of days compared to traditional cash-out refinances especially with small loan amounts say below $50,000.  One negative effect of this speed is borrowers not getting the most accurate valuations because most of the appraisals for seconds and HELOCs are completed via drive by appraisals.  Most lenders for these products will still pay for this service on your behalf even if you don’t close so in most cases you aren’t spending $400 dollars to explore these options, so this is a good starting point even if you never close the loan.

On primary cash-out refinance mortgages there is some greater flexibility compared to doing a second mortgage or HELOC with respect to credit scores and maximums.  If you are VA eligible, right now you can take cash-out up to 100% of the appraised value of your primary residence and 85% FHA loans with credit scores as low as 580.   While conventional loans allow investors and owners of second homes to take just 75% they do allow another 5% on primary residences with the maximum being 80% with a 620 score as a minimum benchmark.  You will likely be required to pay for your appraisal up front but as stated previously the valuation is more thorough which can help you maximize all potential equity.

While it is good for our country that we avoid another 2008-2009 real estate meltdown, conventional cash-out maximums will likely never see 2007 levels again.  The positive side for you is that if you bought a house using a conventional loan within the last 10 years or as soon as 12 months ago, chances are you put at least 3-5% down.  Standard down payments and regular monthly balance reduction coupled with faster than normal market appreciation may make a cash-out refi of your first mortgage a sensible option.  To discuss your scenario or a free quote email us, call us at 888-269-8335  or apply online 24 hours a day.

Loan Purpose Disclaimer:  If you are looking to do renovations and are thinking of doing a cash-out refinance, ask about the benefits of renovation loans first.  Renovation loans use future improved value and are not considered cash-out so they allow maximums such as 95% (Conventional) or 96.5% (FHA) with a 640 score on a primary residence.

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