Home owners with equity in their homes may find that a cash out refinance is an effective way to address large credit card balances and reduce monthly payments. Debt consolidation is one of the top reasons consumers choose a cash out refinance.
Lenders offer mortgages secured by the home. This lien gives the lender the right to foreclosure if you stop making payments on the loan. Many homeowners have more than one loan on the house and therefore have more than one lien. The lien position dictates the order in which the loan will be paid off. For this reason most lenders require all liens to be included in a cash out refinance. This might impact loan qualification and cash out options.
WHAT IS THE PROCESS ?
To obtain a cash out refinance you must first determine if you qualify. Generally the lowest acceptable credit score is 620. The highest debt to income is 43% and you must be able to provide income documentation to verify income. The approval process is similar to getting a first mortgage when you purchased the home.
For a cash out refinance the interest rate will be higher, than a refinance with no cash out. You must have purchased the home at least 6 to 12 months prior, depending on the loan program. The LTV will also be dependent on the loan program. With good credit the lender might approve up to 95% of the home’s value, however 80% is more common.
Specialists at Finance Solutions can help evaluate your circumstances to determine if this is the best option for getting your debt under control. Call today for a free consultation.