Odessa Cash Out Refinance 

A cash-out refinance might be the right choice for you if you have built up a sizable amount of equity in your home and want to turn that equity into money you can use.

With a cash-out refinance, you obtain a new mortgage for an amount greater than what you owe on your home. You will receive the cash difference between your new and old mortgage balances at closing. You can use this money for home repairs, debt consolidation, or vacation. On the other hand, you’ll have to start making payments on a larger loan with new conditions.

A Section 50(a)(6) loan is another name for a cash-out refinance in the state of Texas. Refinancing your existing mortgage and taking equity out of your house can both be accomplished with the help of this loan. This converted equity will be given to you in cash after the transaction is finalized.

How Does a Cash-Out Refinance Work?

Each time you refinance, you begin anew with a new mortgage that has different terms. Refinancing can be a means to obtain a lower interest rate, extend the mortgage term, or add or remove borrowers. You can achieve any of these objectives without altering the amount borrowed.

A cash-out refinance, however, involves taking out a new loan for an amount greater than what is owed on the existing mortgage. Any homeowner is eligible for a Texas cash-out or Section (a)(6) loan as long as they have 20% equity on their property. The loan-to-value (LTV) on Texas cash-out loans is limited to 80% of the property’s appraised value.

To illustrate, let’s say you have a $100,000 mortgage on a home valued at $200, which gives you $100,000 in equity. You can refinance your $100,000 loan balance for $150,000 and receive the $50,000 in cash at closing. The maximum loan amount you may get from a Texas cash-out is $180,000, or 80% of the property’s value of $200,000.

To determine how much of a loan you can get for a cash-out refinance, your lender will order an appraisal of your home. If home prices have increased in your area, your home may now be worth more than what you paid, thereby increasing the amount you could borrow.

Odessa Cash-Out Refinance Requirements

To qualify for a cash-out refinance, you must satisfy lender requirements. These can vary, and it is always prudent to shop around to determine which lender offers the lowest interest rate. However, you will likely need to meet these requirements:

           – Debt-to-income ratio, or DTI. Usually, a DTI of 45% or less is required for a cash-out refinance.

           – Credit score. A higher credit score will likely result in a lower interest rate, but a score as low as 620 may still get you approved for a cash-out refinance.    

           – Home equity. For a cash-out refinance, lenders typically require that you have at least 20% equity in your home.

           – Seasoning requirement. No matter how much equity you have in your home, you will need to have owned the property for at least six months before you can cash out refinance with a conventional loan. On the other hand, there is a 12-month waiting period for those with FHA-insured loans before they are eligible for cash-out refinancing.

Alternatives to Cash-out Refinance

There are other means of accessing your home’s equity without resorting to a cash-out refinance. Borrowing against the value of your home is possible through home equity loans and home equity lines of credit (HELOCs). Both are second mortgages, also known as junior liens, and can be taken out in addition to the primary loan.

With a home equity loan, you borrow a lump sum, similar to what you would receive with a cash-out refinance; however, because you are not touching your primary mortgage, your interest rate will not change. A HELOC is more flexible because it provides a line of credit against which you can borrow as needed. Both home equity loans and HELOCs have low origination fees, but because they are second mortgages, their interest rates are typically higher than those of a cash-out refinance.

We Can Help You Make The Right Choice.

Whether you apply for a cash-out refinance or take out a secondary loan on your home, the decision puts your finances and home on the line. Perhaps your circumstances call for debt consolidation or settlement, or even bankruptcy. Before making a significant financial move, you should examine your options.

At Capital Home Mortgage, we provide you with all the information you need to make the right choice. Our mortgage specialists are experts at matching consumers with the most appropriate solutions for their objectives. Home equity is a valuable asset for any homeowner, and we’re here to provide you with all the help you need to make sure you use it well.

Call our home loan specialists at (432) 218-4828 for a free consultation.