24 Hour Mortgage Info |

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.

Eg. I want to refinance a 155K mortgage and 30K equity line into 185K fixed mortgage. If I take out 50K cash too, is the APR on the 50K cash the same as the 185 fixed mortgage?

Yes, a cash out transaction has a higher cost than a rate & term, or purchase.

Also: If that 30k equity line was taken out after the purchase and thus was not used to originally acquire the property, combining those loans into one new one is a cash out transaction even without the extra 50k.

If you financed 100% of the price of the home you are basically screwed as home prices / worth have tumbled and are continuing to drop, if you do not have over 20% equity in your home your chances are slim to none

Any one know whats the difference and the pro and cons about Home Equity Loan and Cash Out Refinance? Which is better?

They’re both bad ideas. You want to owe as little as possible in comparison to your home’s value, anything you do to increase the amount you owe puts you in a a bad financial position. The biggest point to understand is that your home is not a bank, and should never be treated like one if you want to keep it.

A good number of the people losing their homes now took out these types of loans. Some of them had financial issues and couldn’t keep up with increased payments. Others just suddenly had to sell for various reasons. In either case, when selling was the only option, these people were in serious trouble because they didn’t have the equity to sell and pay the necessarily fees.

Think about it for a second: if you have to borrow to get access to this cash, where would you get money to make up that difference if you suddenly had to? Let’s say you owe $100,000 on a $130,000 home, and you cash out $20,000 (you probably can’t get 90% of your home’s value) so that you now owe $120,000. What if you suddenly had to put your home on the market tomorrow?

Let’s say you manage to sell the home for $130,000. If you make it through the sale without having to make any repairs to the house and you’re not paying any closing costs (all of which would be a miracle in a buyer’s market), at a 6% commission you’ll wind up with $2,220 left over. That’s a pretty narrow margin these days. If you had never treated your home like a bank, you’d have a cushion of $22,220 instead to make your sale happen.

No one ever thinks they might have to sell tomorrow, but many other people have been in that spot and learned the hard way that they were wrong. Unless you need the money in your home for something vital (like say a life saving operation), don’t touch it!

I'm a 'passive' investor and own rental property A & B.

If I do a cash-out refinance on rental property A, can I write all my interests as mortgage interests to offset my rental income from propety A? Is there a limit? And if property A ends up as a loss, can I use it offset the passive income from property B? Is there a limit?

there are multiple limits of various kinds.

1st. if you cash out more from property A than your remaining equity in property A [original down payment or basis less accumulated depreciation plus capitalized items during your holding period less salvage received or loss deducted], the excess is taxable income in the year received.

Depending on depreciation recapture provisions, some or all of this may be ordinary income.

2nd. yes, all the interest paid on debts on Property A would go on Schedule E.

3rd. yes, the net loss on Property A [including depreciation] would offset the net income on Property B.

4th yes, there is a limit on losses from passive activites — and a separate schedule on which to figure it out [see forms at irs.gov -- Limitation on Passive Activity Losses -- I think that's what it is called].

5th. points, costs, and fees paid to refi the debt on Property A probably have to be capitalized and amortized over the life of the new loan. [The loan statements will include them in the capital paid figure]. The similar remaining balance of points, fees, and costs that you are currently amortizing for the current loan on Property A are probably deductible as financing expense.

Atm, that's all I can think of…

***
And that's all if you can find a cash-out refi of an investor property in the present loan market. My offhand guess is that you'll not be allowed to lower the equity to appraised value ratio beyond 20% at least — possibly more depending on market. AND, I'll bet the lender will want an unconditional personal guarantee of the loan as well.

***
Are you sure you don't want to hire an accountant to figure out this stuff??

I am planning on buying a home that needs a lot of work. I also have some credit card debt I would like to get rid of. I have the 10% to put down and have been pre-approved for a mortgage.

If I buy this home, can I then turn around and do a cash-out refinance for, lets say, 80%-90% of appraisal value? Would I have to wait a certain period before a bank would do this?
Good info on the 203K. Thank you very much.

The home is selling so low because the upstairs has not been finished. Judging by the comps in the area, if I finished and updated the home properly, it could be worth twice as much as I initially paid. But I am not doing this for investment. It is tailor-made for my wife and me.

You should consider an FHA 203K loan. This is a loan where you can purchase the property and get additional cash to do repairs. It will save you money in the long run as you will not incur two sets of closing costs. Not all lenders do these, and many loan officers won't because they are not familiar with them.
Mike

Have you heard of OptAmerica?

I went through Suntrust first to refinance my rental property. They told me it's hard to get cash out with an investment property. I then went through Lending Tree, and Opt America sent me a Good Faith Estimate which looks WAY better than what Suntrust was offering me. I'm wondering what the difference could be. With Suntrust, I have to pay a 1% origination fee, .375 discount point, getting only $3000 cash back. With OptAmerica, there is no origination fee, no discount point, no prepayment penalty, and $8,000 cash back. Whats the catch?

Multiply the 1% origination fee and the .375 discount x your loan amount… total sum of both. That is where your money is going Suntrust is eating up your cashout with in-house fees. The OptAmerica is the better loan if your objective is cash out and not the rate.

People borrow to invest all the time just not in annuities or stocks etc. People leverage the value of their homes to purchase more real estate, start a business, grow their business etc. But to borrow for a small return isn't a bright thing to do or to borrow money to try something that is high risk is dangerous too.

I have to agree with the others it isn't a good decision but I wanted to clear up what I felt they were saying.