Refinance Mortgage

However we have only owned our home for 6 monthes and I know most lenders will not give you both a lower payment AND cash out until you have owned your home for at least a year. Does anyone know of a mortgage compnay that will work with us now?

Getting through this process after only 6 months, will be difficult. Depending on how much you paid and/or financed, I would suggest opting for an equity loan versus going through the entire re-finance process right now.

Call around – there are brokers who can find lenders who will do this – again, depending on how much equity you think you have in your home after only 6 months.

Good Luck!

Example: propert is appraised a $65k, 80% of that is $52k. Amount owed is $24k, cash out would be about $24 after fees. Would taxes be owed on this amount or only when house is sold for final price?

No taxes due on the cash out from the refi.
It is one strategy to obtain tax free $ from investment RE. Your basis does not change however, and the amount of cap gains will still be based on the sales price less the basis.

Is it truly possible to do a cash-out refinance without owing back any money? If so, how would you do this? I hear and read stories every once and awhile about people claiming how they were able to pocket cash/money ($10K, $20K, $50K, and up) by performing refi’s of their home/mortgage loan. But that money typically comes with strings attached, right? That is, yes, you do get cash back from the lender based on the new appraised value of the property, but you eventually will have to pay this money with interest. It’s not like it’s free money that one can spend on whatever they want (travel, merchandise, etc.), correct? Someone please confirm (I’m very new to the world of Refinancing). Thanks!

If your house has gone up in value, yes it is possible to refinance and walk away with cash.

You are correct though, you will have to pay this money back eventually (plus interest).

I am in the process of refinancing my home loan. I have a second mortgage, and the lender wants me to pay it off in order to go through with the refinance. They gave me two choices. 1) Pay off the 2nd mortgage in cash and go through the refinance. or 2) Get a cash out to pay for the 2nd mortgage, in effect consolidating both mortgages into one. The additional charge for the cash out is around $1500.

I’m wondering if I should use my savings to pay down the 2nd mortgage of $80,000. But since my new mortgage rate is less than 5%, I’m wondering if I could do better than that by investing the $80k in a conservative mix of stocks, bonds, cash, and gold mutual funds and come out ahead over the next 20 years.

Any comments? Is now a time to be conservative and minimize debt, or should I try to beat 5% by investing?

if you are going to refi, you would have to pay off all loans I imagine – are you sure you even have ANY equity in teh house at all that would allow you to refinance?

if you have 2 mortgages, I doubt you had much equity left after taking that 2nd mortgage and most homes have gone DOWN in value at least 20% in the last 4 yrs and they usually only let you refi up to 80% of your homes value

a "conservative" mix of investments won’t get you much more than 5% return most likely

you should be looking to get the mortgage paid off as quickly as possible, not pulling cash out of it and going back to a 30 yr mortgage

You can only do a cash-out REFI if you have equity in your house. What is the value of your home and what is the outstanding debt agst the house? That will give you an idea of how much equity you have. To go througb the process, you can use anybody…a broker, another bank, your current bank etc…it’s all about who gives you the best pricing. But remember for every enquiry you make, they have to pull your credit so get your credit first and then get some preliminary quotes. Good Luck!

Generally speaking, the money borrowed (even if taken as cash) is not taxable. There is not a gain since the amount borrowed is owed back to the bank. Where it will come in to play is when the house is sold. Profit will be Sell Price – (Purchase Price + Improvements). Money borrowed against the equity does not enter in to the equation.

If the house is your primary residence (or meets other criteria) you can sell the house and exempt a large part of the gain from the sale.

Every situation is different, so you should read the tax instructions and see how they apply to your situation.

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.

It depends on what interest rate you currently have, but to re-fi costs a lot and a HELOC does not.

Ok Guys, Im new to this whole home buying thing, but I just have a question because I hear about it all the time. When someone refinance a house after a few years, they get a lower rate and they have amassed a good amount of equity both from paying the mortgage and from increases in home value. If they refinance, how do they pull out cash from the refinance and still maintain the same payment, sometimes lower?

Lets take this scenario: $620000 home. $400000 mortgage for 30 years @ 6.5%. After ten years the home increases to $1000000 and balance on mortgage is $340000. Lets say after the refinance the rate is 5%. I know the new payment for another 30 years would be $1825/mo but "how and what would they be able to pull out"?

Can anyone explain (in lamens terms)? thanks so much!

Well. There are a few questions that I think you are trying to figure out here. 1-what a refinance is and what they talk about when they mention the word refinance 2-what will you be able and how to pull out of the re-fi.
*A refinance is essentially a re-structuring or if you wish, taking on a brand new mortgage arrangement different from your present one. Typically, people refinance for getting MORE money out of their house through the HIGHER mortgage due to increase in the value of their property. In you case, you are at ~66% loan to value of your house (forgive decimals…), that is you ALREADY have 100-66%=34% of equity in your house. With your house price going up to 1Mill and the mortgage balance being at 340,000, your equity increases to 66%, i.e. reverse of what you have now except that you now "OWN MORE" of your house than before. Here we are logically arriving at answering question number 2, i.e.
**Should you property increase in value to 1 Mill and your mrtg balance being at 340K, you can go back up to the Loan to Value that you currently have, that is to 34% of equity in the house. So, doing simple arithmetic: A/34%*1Mill=340,000. B/1 Mill-340,000=660,000. This is the amount you can refinance to and "pull out" 660,000-340,000(mrtg balance then)=320,000. Your 320,000 will be your new money you could potentially invest into another property. The only caveat that you should be carefuly here is the potentially (!) lower rate on a re-fi. Yes, if rates go down in the market and you are able to fetch an awesome broker’s deal, then possibly you might end up with 5%. Again, typically, on an INcrease to your mortgage balance (remember: you were at 340K and now at 660K), the rate may be blended between what you have NOW and what the new rate on a new mrtg term and balance gonna be. It is highly probable your rate will be either:
A/ lower than 6.5% now IF rates go down and you are able to find a better deal at the lower rate then
B/blended HIGHER if the new rate on the new funds to be added is generally higher due to market conditions
C/ blended LOWER if the new rate on the new funds to be added is generally lower due to market conditions
Anyhow, you need to do some shopping and what I call "thorough explanation meetings" with those people you are going to talk to regarding your new 660K mortgage then. Who knows, eh?
You pull the money out on the new 660K mortgage by simply getting a new type of a mortgage when the old one will be paid off (with a balance of 340K) and the DIFFERENCE will be simply deposited (by the new lender providing the new 660K mortgage) to your bank account.

Uff, I even got tired typing all of this fo ryou…Hope that helps…:-)

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.