24 Hour Mortgage Info |

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.

I want to do some extra work on my car to enhance it's value and condition, rather than just trade up. I like my car and I know what I've got into it already. I don't want to get another used car–something that I have to start all over learning about, in terms of its mechanical needs. I just want to make my current car better, with the extra cash imbedded in the refinance.

you can get cash above the payoff for your car if you have enough equity to meet the LTV guidelines for the bank, and still have room. Check with all the local banks to see what their guidelines are, and what they would lend on your car.

Meaning, we owe $99K, can we refinance for $125K?

(to Amanda: 100% loan to value means getting a loan for 100% of the home's value. Just because you owe on a home doesn't mean you owe 100% of what it's worth.)
EDIT: If you really want to get technical Amanda, there is no "a" before 100%. So, it's clarified just fine. You read it wrong. No, I didn't ask if you could refinance a loan that is 100% of the value of my home. Go back and read again.

Texas state law says that the only way you can do a 100% on the first refinance after the purchase but the only way to do that is if you still owe 100% of what the house is worth because you can't get cash out. If you wanted to do cash out you could but you would not be able to go above 80% loan to value due to Texas state law.

I refinance I would reduce my monthly payment by 160$, some of that is removing PMI and some is a better rate. at the same time I was going to take 5K out to payoff CC bills. I figure by doing this I could free up appx. 413$ a month total. I only plan to be in the home for another 2.5 yrs and my closing costs are going to be around $1000.00.
So my current payment of 920 which includes PMI, would be reduced to 757 with a 5000 cash out.
So does it make sense (I'm in about 5000 CC debt at about 250 min. payment a month). Any help is appreciated.

As long as your true closing costs are $1000 it would be beneficial. Were you told that your closing costs are only $1000 or have you seen actual paper work that says they are $1000.

Considering that you only plan to be in that house for another 2.5 years, you would not break even on the costs if the closing costs are more than $4890.

I do not count the savings on your credit card because unless you change your spending habits, you are most likely to continue to use the card, so that is not a guarantee savings.