Withdrawal Refinance Calculator – Forbes Advisor
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Cash-in refinancing can be a good option for homeowners looking to tap into the equity in their home. With this calculator, you can see what your monthly payment and overall cost would look like with a cash-out refinance.
How to Use This Withdrawal Refinance Calculator
To use this withdrawal refinance calculator, you’ll need to gather some basic information, including:
- The current value of your home
- How much you still owe on your mortgage
- How much do you want to borrow
- The term of the loan you want (usually 10 to 30 years)
You’ll also have the option to enter some additional factors that may affect your overall cost, including:
- Interest rate
- Estimated property taxes
- Home insurance costs
- Homeowners Association Fee (HOA)
- Private mortgage insurance (PMI) fees
Afterward, you’ll receive an estimate of how much you might qualify for with a cash refinance as well as what you can expect to pay per month and overall.
What is cash-in refinancing?
A cash-out refinance is a refinance option that allows you to pay off your existing mortgage with a larger loan. You’ll receive the difference as a lump sum to use as you wish (minus closing fees and costs). Repayment terms are generally up to 30 years.
Depending on your credit, you might qualify for a lower interest rate than you’re currently paying with a cash refinance, which is helpful because you’ll be making payments on a larger loan.
However, keep in mind that because lenders consider cash refinances riskier than standard rate and term refinances, they tend to offer somewhat higher interest rates in comparison. Your rate will also vary depending on whether you opt for a conventional loan or a loan guaranteed by the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA).
Also remember that, as with any mortgage product, your home will serve as collateral for the cash refinance. This means you risk foreclosure if you don’t keep up with your payments.
How does cash-in refinancing work?
With a cash refinance, you’ll pay off your existing mortgage with a new, larger loan and pocket the difference. Mortgage lenders typically allow you to borrow up to 80% of your home’s value with conventional refinancing, which means you must retain at least 20% of your home’s equity. These limits differ for government-backed loans: up to 85% for an FHA cash-out refinance and up to 100% for a VA cash-out refinance.
Collection Refinance Costs
As with your first mortgage, you will also pay the closing costs of a cash refinance. These usually range from 2% to 6% of the loan amount. These costs may include fees such as origination fees, appraisal fees, credit check fees, etc.
If you want to keep your costs as low as possible, be sure to take the time to shop around and compare your options with as many mortgage lenders as possible. Consider interest rates and fees as well as repayment terms and eligibility requirements.
Cash-out Refinance vs. HELOC vs. Home Equity Loan
Cash-out refinancing isn’t the only way to tap into the equity in your home. You can also consider a home equity line of credit (HELOC) or a home equity loan. Unlike a cash refinance which replaces your first mortgage with a new loan, these products are technically second mortgages which you will pay on top of your existing loan.
Here’s how HELOCs and home equity loans work to help you compare them to a cash refinance:
- HELOC: This is a type of revolving credit that allows you to repeatedly draw and repay a line of credit, similar to a credit card. You’ll typically have five to 10 years to access cash with a HELOC while paying interest only, then another 10 to 20 years to pay back what you borrowed, plus interest. HELOCs usually come with variable interest rates that can fluctuate with market conditions. Note that these rates are usually higher than what you would get with a cash-out refinance.
- Home equity loan: Unlike a HELOC, a home equity loan is a fixed rate loan that provides you with a lump sum to use as you wish. Although home equity loan interest rates tend to be higher than what you would get with a HELOC, they are generally lower than what you would pay on a personal loan.
Keep in mind that like a cash-out refinance, a HELOC or home equity loan will be secured by your home, which means you risk foreclosure if you can’t make your payments.
Frequently Asked Questions (FAQ)
How can a cash-out refinance reduce my monthly mortgage payment?
Depending on your credit, you may be able to get a lower interest rate on a refinance than what you currently have. Or you could reduce your payments by extending your repayment term. For example, refinance over a term of 30 years from an initial loan of 15 years. Keep in mind that you will pay more interest over the longer term.
Plus, because you’ll be taking out a larger loan, you could still end up with higher monthly payments than you paid.
How much equity does a cash refinance require?
You will generally need at least 20% of your home’s equity to qualify for a cash refinance, but this can vary depending on the lender and the type of loan you choose.
This means you can have a maximum loan-to-value (LTV) ratio of 80%. To calculate your LTV ratio, divide what you owe on your mortgage by the appraised value of your property. For example, if you owe $300,000 on your mortgage and your property is valued at $400,000, your LTV ratio would be 75% ($300,000 / $400,000 = 75%).
How much money can you receive through cash refinancing?
With conventional refinancing, you can typically borrow up to 80% of your home’s value, which means you must retain at least 20% of your home’s equity. But if you opt for a VA cash-out refinance, you may be able to access 100% of your home’s value.
For example, let’s say your house is worth $400,000 and you currently owe $150,000 on your mortgage. To calculate the equity in your home, you need to subtract your loan balance from the appraised value of your home. So $400,000 – $150,000 = $250,000. If you can borrow 80% of this capital with a cash refinance, you will be able to access $200,000 ($250,000 x 0.80 = $200,000).
How can I find the best cash refinance lender?
To find the best cash refinance lender for your needs, it is important to shop around and compare your options among as many of them as possible, including your current mortgage lender. Consider not only interest rates, but also repayment terms, fees charged by the lender, and eligibility requirements.
After doing your research, you will be able to more easily identify which lender is best for you.
When does it make sense to get cash refinance?
Whether it’s a withdrawal refinancing makes sense will depend on your personal situation and financial goals.
Since cash refinances tend to come with much lower interest rates than other financing options, like personal loans and credit cards, they can be a good choice if you need to cover expenses. important. For example, you could use this type of loan to pay for home renovations, cover education costs, or consolidate high-interest debt.
But if you can’t qualify for a lower interest rate or find it difficult to make higher monthly payments, it might be best to consider other options.
Who is eligible for cash refinance?
Although the eligibility criteria for a cash refinance may vary by lender, there are a few common requirements.
- Decent credit: For conventional cash-in refinancing, you will need a credit score of at least 620. If you opt for a government guaranteed loan, you could qualify with a score as low as 580.
- Low debt-to-income ratio (DTI): Your DTI report is the amount you owe in monthly debt payments relative to your income. For a cash-out refinance, your DTI ratio should not exceed 50%, although some lenders require lower ratios.
Sufficient own funds: You will generally need at least 20% equity in your home.