Cash Out

What is a cash-out loan?

If you have equity in your home, you can refinance more than you owe on your current mortgage and take that extra money (cash-out) to do many things.

Do I qualify?

There are a few limitations as to how much cash-out you can take and what type of loan programs are available. The maximum Loan to Value is 80%. If your home is worth $500,000 and you owe $350,000 your max loan amount is $400,000 (500,000 x 80%). After the current mortgage is paid you would have approximately $50,000 cash-out, minus fees.

There are also credit limitations. For conventional loans you need a minimum 620 credit score. Since your loan to value is 80% or less. You will not have mortgage insurance.

Are there any exceptions?

VA is the exception they allow up 100% of your home’s value.

What if I have less than perfect credit?

Sometimes you just need a little help and FHA loans will go as low as 580 credit score. FHA makes it easier to qualify if you have less than perfect credit. If you pay off most or all of your bills and continue to make the remaining payments on time your credit scores should increase. You can refinance into a conventional loan and remove the mortgage insurance.

With FHA even though you have a loan to value of 80% or less, you will be required to pay mortgage insurance.

What can I do with my Cash-Out?

You can do anything you want. Below is a partial list.

  • Pay off high interest credit card debt
  • Take a lump sum of cash
  • Make home improvements
  • Buy an investment property
  • Improve your financial situation by reducing your total monthly debt
  • Have more disposable income
  • Pay off a car loan
  • Pay student loans
  • Take a vacation
  • Pay for elderly care
  • Pay for college
  • Boost your credit score
  • Finance a wedding
  • Got too far in debt and can only afford to make the minimum payments.