Home Refi With Money Back

Home Refi With Money Back
  • Opening Intro -

    If you are considering refinancing your mortgage, you likely have been paying attention to mortgage rates.

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Current mortgage rates remain near historically low levels, therefore if you haven’t refinanced in years, you may be able to save yourself some money.

Some homeowners want to refinance with an eye toward cashing out some of the equity that has been built up in the home. So-called “cash out refi” loans are an attractive way to cover medical bills, the cost of college education or to pay for home renovations.

1. Get educated — Your loan options are many and “home refi” loans work a bit differently. First, you need to have very good credit. Second, your home should have sufficient equity built up to borrow money. If both points are in your favor, then you’re in a good position to refinance your home and get some money at closing.

2. Buyer awareness — To be perfectly frank, a cash out refi will leave you with more debt than traditional refinancing. That’s because you will be tapping equity and adding those funds to what you already owe on your mortgage. A lower interest rate can help, but the newer loan will likely raise your monthly payments and may also extend your loan terms. Be fully aware of what you’re considering before moving forward.

3. Calculate the money to be borrowed — How much money do you need to take out? Attempt to identify the amount and stick with that figure. For instance, if you need $30,000 for college costs, then plan to borrow no more than that. That means if owe $104,000 for your home, that cash out refi portion will bring your total date to $134,000. Again, keep in mind that your new mortgage balance will come in higher than your current balance.

4. Shop for a new mortgage — Your current mortgage lender is a good place to look when considering a cash out refi. But, it isn’t the only place that you should look. Loan rates, terms and closing costs can vary from lender to lender — compare offers and take the deal that is right for you.

5. Assemble your documentation — Even before your lender gives you a “nay” or a “yeah” regarding your mortgage application, you should begin to assemble the documentation required to close your loan. This will include recent W2 forms, copies of your income taxes for the past two years, pay stubs and requested legal documentation. Your banker will give you a list of needed items — make sure that you follow it.

6. Work with your lender — Once approved for a loan, continue to work with your lender to move the process along. Submit the required documentation, schedule an appraisal and hire an attorney, if needed. Once everything has been satisfied on your end, your lender will set a closing date.

7. Attend your closing — Guess what? You’re now ready to close on your cash out refi. Make an appointment with your lender, attend the closing, sign the paperwork and pick up your cash out check. You can also request that your bank deposit the money in an account for you to draw down as needed.

Refinance Considerations

If you are turned down for refinancing, ask your lender for the reason why. It might be that your credit score is too low or that your debt-to-income ratio is not favorable. Work toward fixing these problems and reapply when your banker is satisfied that your financial picture has improved.

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Categories: Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".