Mortgage refinancing allows you to borrow against your equity, while hopefully lowering your interest rates. To get a cash out refinance, you need to have excellent credit. If not, you will need the assistance of a sub-prime lender or apply for a line of credit.
A refinanced mortgage can allow you to take out all of your home’s equity. Anytime you cash out part of your equity, your refinance rates will increase but rates will certainly be lower if you take out a second mortgage.
However, with no equity, you will need to carry private mortgage insurance. But if you choose a sub-prime lender, you don’t have to worry about paying premiums.
Lenders are always concerned that whether you can repay the loan. Without equity, lenders look at other factors, such as income, cash assets, and credit history. Income is important when it is compared to your debt ratio. Debts like credit cards and student loans, decreases your borrowing power. So if possible eliminate or reduce your debt.
In the case of a lay off or other financial emergencies, lenders want some reassurance that you can handle monthly payments. That is why cash assets, which also include cash daposits and money market accounts, are most important. 6 months of savings is considered a good start.
Credit history always predict how likely a person is going to skip payments. A good score and they will also be more tolerable with your application, but charge a slightly higher rate for it.
Getting Better Terms
Be prepared to pay at least 3% at the time of closing for your refinancing. Otherwise, those cost will be factored into your new mortgage and you will be paying additional interest.
Research your loan offers before making a final decision to know that whether you are getting the best deal. Other than the issue of interest rates remember to take a look at closing costs as well.You may also find a better deal by taking out a second mortgage to access your equity.