Taking cash out of the equity of your home could be a legitimate way to fund a temporary cash crisis now or to have it on-hand if the need arises. Most homeowners can pull out the difference in 80% of the fair market value of their home and what they currently owe.
The most frequently cited reasons for refinancing are to lower the payment, eliminate the private mortgage insurance, combine mortgages, consolidate debt, convert an ARM to a fixed rate mortgage, remove a person from the loan or to take cash out for another reason.
The option of using your equity to deal with unexpected living expenses or potential lost wages in the future could be a good reason for doing a cash-out refinance. It is important to consider that it could increase your monthly payment instead of lowering it which would result in higher expenses during uncertain economic times.
Some lenders have recently raised the minimum credit score requirement but borrowers with good credit and the ability to repay should be able to refinance. Lenders are reporting that during the Covid-19 crisis their processing time is taking longer but they have implemented procedures to safely facilitate the application as well as the appraisals.
While homeowners with an FHA loan are available for a streamline process because FHA is already insuring the mortgage to be refinanced, the cash-out is limited to $500. Even though the owner may not be able to pull funds out of their FHA equity, refinancing may lower their payment and therefore, lower their expenses.
Unlike conventional loans that require income through a job or other sources, refinancing an existing FHA loan does not require income verification or an appraisal. The borrower cannot be delinquent on their current FHA loan and it must be at least six months old. The refinance must reduce the current interest rate or term or both.
Another alternative for homeowners is a HELOC, home equity line of credit, where you do not incur interest expense unless you actually draw on the line of credit. It will be a variable rate home equity loan similar to a credit card letting you borrow up to a specific limit when you want and repay it slowly over time.
Refinancing a home incurs closing costs which can be paid in cash or added to the financed amount. The breakeven point to recapture the cost of refinancing is determined by dividing the monthly savings into the cost of refinancing. If you stay in the home less than that time, refinancing could be an unnecessary expense.
If you would like any professional residential Real Estate advice, contact us at Paramount Real Estate Services. 1008 12th St. SE Salem, OR 97302 503-851-1645
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At Paramount Real Estate Services, we are taking drastic measures to protect our clients and the public during this time while still working hard to service our community. Here are our policies that we have put in place to ensure minimizing the risk of infection or transmitting any virus.
1) Wash hands with warm water and soap for at least 20 seconds thoroughly throughout each day.
2) Don’t touch your face.
3) Cough & Sneeze into your elbow.
4) Always stay at least 6 feet away from other people.
5) If you feel sick or show any symptoms, do not meet with people or show property. Stay home.
6) Wear masks when meeting with people.
7) Don’t come into the office unless you need to.
8) Follow other CDC and OHA guidelines.
Meetings & Consultations:
1) Video, phone and social media are acceptable and only meet when absolutely necessary.
2) Ensure privacy and confidentiality.
1) Ask if Face Time, Zoom, Skype, other apps, or video conferencing & pictures will suffice for your clients to give them enough information to view properties without being present. With permission from the seller and the listing agent, visit the property by taking precautionary steps to protect the premises. Preview properties beforehand, if possible, to make sure it is a good candidate for your buyers.
2) Only show property to people who really are qualified and ready to purchase a property.
3) Always make sure the listing agent/company and sellers give permission to show their property & follow their showing procedures.
4) Wash hands before entering someone’s home. Bring hand sanitizer for you and your clients.
5) Clients are not to touch anything without first sanitizing hands and wearing nitrile or latex protective gloves.
6) Qualify buyers for your listings and make sure your sellers feel comfortable with buyers showing their homes. Follow showing procedures.
7) Provide hand sanitizer and post guidelines on your listings for agents and their buyers.
8) Move quickly and don’t linger inside any property.
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