Today’s mortgage rates are very low, making it an ideal time for equity-rich homeowners to explore cash-out refinancing options. If you’re thinking of applying for a cash-out refinance, Luxury Mortgage offers this option in a variety of loan products. We will highlight these products in today’s post and offer a simple overview of the cash-out refinancing process.

What is a Cash-Out Refinance?

In a typical rate and term refinance, a homeowner refinances their existing mortgage with a new one, usually with a lower interest rate or better terms. Traditional refinances cover the remaining balance of the old mortgage. However, with a cash-out refinance, homeowners can refinance their existing mortgage for more than what they currently owe and receive the difference in cash. The amount they can receive depends on how much equity they have in the home and the guidelines can vary depending on the type of home loan program they’re using for the refinance.

Types of Cash-Out Refinance Loans

Luxury Mortgage is pleased to offer cash-out refinancing options for several of our mortgage products.

Conventional: Conventional mortgages are home loans that are not backed by a government agency such as the FHA or USDA. Typically, conventional mortgages meet the down payment and income requirements set by Freddie Mac and Fannie Mae, and they conform to the limits set by the Federal Housing Finance Administration (FHFA). In simpler terms, conventional mortgages are your basic home loans that follow the most common guidelines set up by government-sponsored entities; however, they are not insured by the federal government.

FHA: FHA loans are mortgages that are backed by the Federal Housing Administration (FHA) and often have more accessible guidelines than conventional mortgages. For instance, FHA loans allow down payments as low as 3.5%, are typically more lenient with credit scores and allow gift funds for down payments.

With an FHA loan, cash out refinancing is an option and borrowers may be able to take advantage of higher Loan-To-Value (LTV) cash out limits than are available through most other refinancing products. In other words, with an FHA cash out refinance, borrowers may be able to refinance for a larger amount and therefore receive a larger portion of their equity in cash.

Jumbo: While conventional loans are subject to certain limits, jumbo mortgages allow larger sums of money to be borrowed, even if they are beyond the conventional loan limits.   Luxury Mortgage is pleased to offer competitive pricing on jumbo home loans for both purchase and refinance.

The loan limits for jumbo lending are not set by any governing body and usually range from $625,501 to around $1,500,000 or $2,000,000. While Jumbo mortgages are also available with long term fixed interest rates, adjustable rate products for this option are more common. Cash-out refinancing is available on Luxury Mortgage’s jumbo loans.

Simple Access™ : Simple Access™ home loans from Luxury Mortgage are a select group of mortgage options that offer alternatives to conventional financing. With a Simple Access™ loan, borrowers can usually take advantage of less restrictive documentation requirements. For example, the Asset Qualifier mortgage under the Simple Access™ product umbrella allows borrowers to use assets to qualify for the mortgage instead of traditional income.

Other Simple Access™ programs include the Investor Cash Flow Mortgage, which allows borrowers to use the cash flow on an investment property to qualify, and the Bank Statement Qualifier, which allows borrowers to use personal or business bank statements to qualify instead of traditional income documents.

Simple Access™ home loans can be used for purchase or refinance, including cash-out refinance. Talk to one of our loan professionals to learn more.

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