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do you have to have equity or how does that work. Is refinancing and pulling cash out the same. what is the difference?

You need equity in the home to take out a home equity loan. So, they will usually have an appraiser come through the home and inspect it. He/She will do a market analysis against other homes in the neighborhood that sold with similar options. Based on that, they come up with a number for what the house is worth. Then, they look at how much you currently owe on the home. Usually, the amount that is available to you for a home equity loan is the appraised value of the home minus the amount you owe on the home. Home equity loans are running over 9% these days.

You gain equity in a home through two ways….

1. Paying down the principal of the loan.
2. Market appreciation of a home.

If you just bought a house, odds are little time has passed for either of the two activities mentioned above to occur so you likely have little equity in the house….unless you made a big downpayment on the home.

What occurs during a refi that can give you cash is that they basically give you a new loan on the principle balance of the existing loan and then wrap a loan up for the extra cash portion into that loan. So, they give you $50,000 cash. Instead of your balance on the home loan being $200,000, it becomes $250,000 for the home loan principle balance plus the cash loan. Then the cash amount is spread out throughout the length and terms of the home loan. Get it?

if you have equity in the home and qualify for a loan, you sure can. I'm assuming that you will be doing the leg work as mom is in NY. Is mom going to apply or is she just signing since she's on title? Either way, if you don't want to involve mom too much, see if she will get grant you power of attorney. This would allow you to sign for her. This power of attorney could be broad and sweeping, meaning you could control all matter for the refi and beyond, or you could make it transaction specific, meaning for the refi only. Do one thing though, and speak with the lending institution about this as they would have to approve the power of attorney, and get a New Jersey durable power of attorney. Some counties can and will reject another states power of attorney, I've seen it happen. New Jersey isn't too bad, but things change, so it's better to be careful. your mom could also come to town for the closing as well, so it's really up to you two. let me know if you have any questions

Assuming that I have a rental property (under an LLC) that has been paid off. I am wondering how easy for me to apply for cash-out refinance or Home Equity Line of Credit under LLC name?
How different does it make to apply for such loan under an LLC v.s. under individual?
I need to get some cash out this property. Any other suggestion?

The lender is likely to ignore the LLC and require a personal guarantee from you before they will grant you a loan. You’ll also likely be looking at a higher interest rate as they will treat it as a commercial loan. Owner occupied residential real estate gets the lowest rates. Non-owner occupied investment property held in the owner’s name gets the next best rates. Commercial property pays the highest rates in most cases and something held in an LLC’s name usually is treated as commercial paper.

Just out of curiosity, why did you set up an LLC to hold property? That usually complicates things with little benefit for you. I’ve owned lots of investment property over the years and held well over $1,000,000 worth at one time but never bothered with or needed an LLC.

Ok Guys, Im new to this whole home buying thing, but I just have a question because I hear about it all the time. When someone refinance a house after a few years, they get a lower rate and they have amassed a good amount of equity both from paying the mortgage and from increases in home value. If they refinance, how do they pull out cash from the refinance and still maintain the same payment, sometimes lower?

Lets take this scenario: $620000 home. $400000 mortgage for 30 years @ 6.5%. After ten years the home increases to $1000000 and balance on mortgage is $340000. Lets say after the refinance the rate is 5%. I know the new payment for another 30 years would be $1825/mo but "how and what would they be able to pull out"?

Can anyone explain (in lamens terms)? thanks so much!

Well. There are a few questions that I think you are trying to figure out here. 1-what a refinance is and what they talk about when they mention the word refinance 2-what will you be able and how to pull out of the re-fi.
*A refinance is essentially a re-structuring or if you wish, taking on a brand new mortgage arrangement different from your present one. Typically, people refinance for getting MORE money out of their house through the HIGHER mortgage due to increase in the value of their property. In you case, you are at ~66% loan to value of your house (forgive decimals…), that is you ALREADY have 100-66%=34% of equity in your house. With your house price going up to 1Mill and the mortgage balance being at 340,000, your equity increases to 66%, i.e. reverse of what you have now except that you now "OWN MORE" of your house than before. Here we are logically arriving at answering question number 2, i.e.
**Should you property increase in value to 1 Mill and your mrtg balance being at 340K, you can go back up to the Loan to Value that you currently have, that is to 34% of equity in the house. So, doing simple arithmetic: A/34%*1Mill=340,000. B/1 Mill-340,000=660,000. This is the amount you can refinance to and "pull out" 660,000-340,000(mrtg balance then)=320,000. Your 320,000 will be your new money you could potentially invest into another property. The only caveat that you should be carefuly here is the potentially (!) lower rate on a re-fi. Yes, if rates go down in the market and you are able to fetch an awesome broker's deal, then possibly you might end up with 5%. Again, typically, on an INcrease to your mortgage balance (remember: you were at 340K and now at 660K), the rate may be blended between what you have NOW and what the new rate on a new mrtg term and balance gonna be. It is highly probable your rate will be either:
A/ lower than 6.5% now IF rates go down and you are able to find a better deal at the lower rate then
B/blended HIGHER if the new rate on the new funds to be added is generally higher due to market conditions
C/ blended LOWER if the new rate on the new funds to be added is generally lower due to market conditions
Anyhow, you need to do some shopping and what I call "thorough explanation meetings" with those people you are going to talk to regarding your new 660K mortgage then. Who knows, eh?
You pull the money out on the new 660K mortgage by simply getting a new type of a mortgage when the old one will be paid off (with a balance of 340K) and the DIFFERENCE will be simply deposited (by the new lender providing the new 660K mortgage) to your bank account.

Uff, I even got tired typing all of this fo ryou…Hope that helps…:-)

I just purchased a vehicle $15,000 bellow its Kelly blue book value. With an auto refinance will I be able to access that cash or get any cash back? Also any information on companies that has this cash back option will be helpful. Thank you!

Auto finance is what I do for a living and the answer is yes you can access the equity in your vehicle by refinancing it.

One of the things car loans are based on is the loan to value, if your $15,000.00 back of Kelly Blue Book you should have no problem getting at least $10,000.00.

The reason I say this is banks use N.A.D.A. not Kelly and they go by loan or wholesale value not retail.

The best time to have done this was when you bought the vehicle, but you should still be able to do it.

Which is the smarter move

Could depend on how long u plan on staying in hs or how much equity u have. Also if u want to go thu hoops again to refinance. may want to compare rates too. if u refinance u start the 30 yrs all over again. its ok if u don't plan on staying there forever. line of credit is good. if u repay the balance u haven't added anymore yrs to loan. only drawbk is u have to pay yrly membership fee whether use or not. that's ok cheap price to pay for be able to access your $. Also u can only get a line for the amt u qualify for usually. if u r close to the requirements for 1st loan then will not be able to get that big a line of credit. why do u need the $ to buy something or want some of equity? don't forget for every 12 dollars u pay u only get to save about 8.00 in the writeoff. best not to have a mortgage in my opionion. pay cash for everything. pay extra into the mortgage so will pay off sooner. feels great not paying mortgage every month.

My 2-family home is valued at 375K. I have 12 years and 88K on it left. My current loan is at a 4.9 interest rate. I need to borrow 220K and need it in lump sum. With todays rates being around 6.5 for a 30 year, I know refinancing is out of the question. Which would be better for me, a HEL or a HELOC? What would my payments be for 30 years, 15 years? Thanks

look the best interest rate you will get is a fixed rate at 30 year if you can not afford this rate, you will get crushed with a home equity or other second note, they are variable and rates are not coming down but going up, after the teaser rate period is over you are going to get whacked almost double the payment, so when looking at a home equity read the fine print, see how long the teaser rate last and figure what ever your payment is double it once the teaser period is over

Here's the info. We want to put an addition onto our home. We purchased it new in 2002 for $119,000 and we borrowed $26,000 on our original loan which is a 5/1 ARM. In our current market area, our home would sell for between $150K and $160K. We will need $50K to do the addition. Which is the best route for us: to refinance and get the $50K or get a home equity loan or home equity Line-of-Credit? It's all confusing and I know there are pros and cons to each product. HELP!!!! Thanks in advance!
Sorry Frazure, but my debt load is minimal and my credit score is excellent…take your advertisment elsewhere.

I would get out of the ARM and get a fixed rate mortgage if I were able to get a decent rate. You will still have plenty of equity if you decide you need to get a home equity loan for something else later.

I recently purchased a new home. I will be leasing my previous home with an option to buy. If the tenant exercises their option to purchase the home, is it possible to use my profit to make a lump principle payment on my new home, and then refinance the remaining balance to lower monthly payments?

You can do that. If you can handle the monthly payments you should just apply that huge payment to your existing mortgage. Look at the full amortization table and see how many years you'd shave off of your mortgage by doing that. It will be substantial! You could own your home YEARS earlier by keeping the same payment and just applying that lump sum to your current mortgage balance!!

good luck!

yes, however it will cause your intrest rate to recalculate.