Cash Out Refinancing - Money In Your Pocket
If you want to lower your current mortgage rate, save money and have cash in hand for immediate purchases cash-out refinancing may be just the solution.
What is cash-out refinancing? Cash-out refinancing allows you to refinance your mortgage for more than you owe and then pocket the difference in the form of cash. This can be ideal for funding college education, buying a car, investing or pursuing a business venture. You use it as you need it. There are some similarities between the cash out program and home equity loan programs.
Benefits both loan types have:
• Tax deductible interest* - This can save you hundreds, or even thousands of dollars a year.
• Unlimited uses - Use the money to pay off higher interest loans, finance home improvements, purchase a vehicle - whatever you want!
• Payment flexibility - With a low minimum payment, you can choose to make a larger payment during some months and then make the small, minimum payment when you need to conserve money, such as around Christmas or during a vacation.
• The closing costs can be financed in the new loan.
How does it work? Here's an example: You currently owe $90,000 on a home that's valued at $160,000. You are seeking to lower the interest rate. You also want $20,000 in pocket-able cash. You refinance the mortgage for $110,000. This leaves you with a lower rate on the balance you owe on the house, and you pocket $20,000 cash to use as you wish.
* Consult your business accountant, financial advisor, attorney or tax advisor to see if these programs are right for you.
Used correctly a cash out refi can be a great tool for investors.
If you use this cash it invest in more properties or to pay for rehabbing expenses it can be one of the best and cheapest sources of funds.
But if you will use the cash for things like buying a car as was mentioned mentioned in the article that makes no sense. Your taking a 15 or 30 year loan out to buy a car. Your giving up equity in your property to buy a car that will go down in value. What will this car be worth in 15 or 30 years when you finish paying for it?
As a RE investor I look for people who have lived beyond their means and are now drowning in debt. One way that they get into that position is by stretching out payments.
If you as a fellow RE investor cash out all of your equity so that you can live large, take a nice vacation or drive a car that you can not afford. Someday your property will be another investors short sale property.
I have had calls from old clients to handle a refinance of their homes to obtain a lower rate of interest and gather cash for items too large for their credit cards. Remember now this is LaLa land.
In several instance the banks have offered really low interest rates, but for short terms and with a gradual increase in interest as time goes by and/or the market changes and the prime rate starts to climb.
My advice is depending on the age group not to play with this type of paper, just take a 30 year or 15 year pay schedule. But as is usual their requirements for the new Beamer or Bentley over rule my advice and I find them going around and making some really snakey deals.
It is my opinion based on present time reading of statistics and 40 plus years of experience that the market is about to experience some interesting changes or adjustment as my stock broker says.
So far the upward spiral in property costs has prevented anything major from occuring. The REO's have been able to sell most of their properties for enough to cover the mortgage amount on which they foreclosed. But as we speak, a great many HUD resales are sitting with the bids too far down to be considered. I have seen a few Beverly Hills type highly overpriced houses in the area of 5 Million to 8 million just sitting with no bids coming in.
Looking back a few years this is a repeat of last time around when the prices broke. So it is once again my feeling, refinance with care, no short term "Exploders" Buy the Rolls and Bentley with funds gained on one time deals
Refinance of course for lower interest but hold the 30 year payment plan, you can always make a principal payment up to 20% of the original contracted amount.
This is the time to polish up your short sale presentations. Renew your REO contacts and watch the MLS sales volume and check high listers as they will be the first to be receptive to lower bids that are structured to help create their future investment portfolios. Also the rental property that has been empty for a few months. Rent is too high. That owner is now prepared to be converted into a holder of Trust Deeds and no more property management.
The air is different the wind is changing. A great opportunity for all the TCI members. OK who busted my crystal ball? Lucius
Lucius
Thank you Lucius! I appreciate you comments throughout the forums. I had a long conversation to this effect with my mortgage broker today as we discussed each property and their terms. Thanks again! ( I'm starting to focus on REO's...any advice you can think of to p***** on I'd love to read it!)
Hey! This website edited my complement and it looks vulgar! Sorry for any wild imaginations out there. I was just asking for more enlightning comments from the mentors on this site. Thanks you guys!
Dear Beth, the war of the machines are on it has bceen seet to limit any utilization of the word ***** for example assessors office. see I misspelled to see what it will do. Aask me no questions. Assinine St. Francis of Assisi
Well that should give it a work out. I appreciate your compliment and will wear it with grace and honor. Cheers Lucius