+1 vote
I just purchased a home last month (Dec 2017).  I bought it cash because so many people were bidding on it.  I now would like to capture as much money as I can back out of the home.  What is the cheapest and best way to do that? refinance? take a mortgage or home equity loan?
asked Jan 18, 2018 in General Financing by anonymous

2 Answers

+1 vote
Hello, and thank you for your very good question.

Any loan you take against this property at this point is considered a cash-out refinance, which puts more limitations on the transaction and raises the cost when compare to those of a purchase money loan. For instance, Fannie Mae and Freddie Mac allow cash-out refinancing only to 80 percent of the property value, while you can purchase with loans of up to 97 percent. In addition, there are surcharges for the privilege of doing this sort of transaction -- with your great credit score, though, these are minimal -- an addition of .875 percent to the loan fees, which translates to a rate increase of .125 to .25 percent.

Alternatively, FHA allows cash-out refinancing to 85 percent, but this program imposes some very expensive mortgage insurance both upfront and monthly, and it never goes away. So I don't recommend this option.

If you're eligible for VA financing, you'd be able to get 100 percent cash out and a very good rate by just paying a funding fee. That's great if you have that option.

If you truly want to get as much cash out as possible, and can't do a VA refinance, your best bet is probably a combination cash-out mortgage to 80 percent, backed by a HELOC or home equity loan to 90 percent. That will put as much cash as possible in your pocket without mortgage insurance.

Thank you for writing, and good luck. You get and compare quotes for this transaction in minutes right here at The Mortgage Reports. https://themortgagereports.com/ratequote
answered Jan 23, 2018 by GinaPogol (47,650 points)
0 votes
If you intend in keeping the property for a while, the best suggestion that I can give you is a cash-out refinance.  Fannie Mae and Freddie Mac allows up to 80% Loan To Value (LTV) on cash-out refinance loans. HUD allows up to 85% LTV on cash-out refinance loans on FHA LOANS. VA allows up to 100% on cash-out refinance loans.  You can do a HELOC, HOME EQUITY LINE OF CREDIT but HELOC'S are not 30 year fixed rate mortgages.  They are amortized for 30 years but balloons out after 5 to 10 years.

Gustan Cho NMLS 873293
Branch Manager
Gustan Cho Associates
answered Feb 10, 2018 by GustanCho (106,540 points)

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