Mortgage rates are at their highest levels since October 2014. A 30-year fixed rate loan now averages 4.2 percent. About 56 percent of mortgage applicants are homeowners looking to refinance. In this installement of our “Eye on Money” series, CBS News business analyst Jill Scheslinger joins “CBS This Morning” with some important reminders if you’re thinking about a new mortgage.
http://www.REIClub.com – Cash Out Refinancing Has It’s Pros and Cons. Here’s a Video on How A Cash Out Refinance Works for Real Estate Investors…
Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I’ve got a quick video on cash out refinancing, and using that money to invest in real estate.
Cash-out Refinance vs. Home Equity Loan
Home Equity Loan – separate loan on top of your first mortgage (2nd mortgage), but keeps existing rates
Cash-out Refinance – replaces your first mortgage, at better rates (if possible), borrow more than you owe
A cash-out refinance allows a homeowner to access the equity of their home. For example, the home’s value is 0,000 and the current loan balance is ,000. The homeowner would like to have ,000. The home could be refinanced for ,000. The old mortgage would take ,000 of the financed amount to pay it off, and the homeowner would receive the other ,000. The payment on the new mortgage would be based on current rates and closing costs?
– low cost way to borrow money from property you own
– get better interest rates and terms
– Improves cash flow by securing lower monthly payments only during low rates
– Build equity faster – secure shorter loan term or could be longer depending on circumstance
– Improve your credit – consolidate debt, pay bills
– College tuition
– Down payment for an investment property – nets cashflow
– Use it on home improvements to increase property value
– Tax Benefits – mortgage interest is tax-deductible
– Not having to pay two loans like a Home Equity Loan
– Fees – hundreds to thousands in closing costs – depends on credit score and equity in property
– Sometimes you’re paying more on fees than money borrowed
– Longer time to pay off your mortgage – extending loan
– If property values drop, lose the equity you borrowed on – Harder on you when you sell
– AVOID NEGATIVE AMORTIZATION LOANS IF STILL AVAILABLE
– LESS LENDERS AVAILABLE TO MAKE THESE LOANS NOWADAYS
– HARDER TO QUALIFY NOW
– RISING INTEREST RATE ENVIRONMENT NOW
Disclaimer: Cash-out refinancing may not be suitable for everyone. It does depend on your current financial situation, and still best to consult with a banker, or mortgage professional to assure that this is an option for you.
With any mortgage refinance, it is important to understand the costs involved. Not just your monthly payments, but your terms and interests rates too because that’s where they get ya.
It’s important to avoid serial refinancing your mortgage if at all possible. Because if you’re not paying attention, you could land yourself in a negative equity position. That’s why a refinance should really only be reserved for times of great need, or in times when rates are simply too good to pass up.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.
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