“Cash Out” Refi’s Hard To Get
HOME LOANS, INDUSTRY NEWS
April 10th, 2009
An article published recently in The New York Times suggests “cash out” refinances so popular in recent years are harder to come by these days. Why? Several factors are at play:
- Borrowers that take cash out of their homes have higher default rates than those who do not
- Lenders are leery lending money in areas where prices are falling
- Many homeowners lack sufficient equity to qualify for cash out loans
- The credit score bar has been raised
Some lenders will allow cash out refinances up to only 60% of the homes value. During the bubble lenders allowed borrowers to extract 100% or more of the property’s value. Today, some lenders don’t even have a cash out refinance program. Others have capped the cash equity that can be tapped to $100,000. Last year the limit was $250,000.
Borrowers can also expect to pay a premium, even with a credit score of 720 or better, of 3/4 % fee and a 1/4 % higher interest rate. If your credit score is lower, say 660, expect a 2.5% higher interest rate or around 7.5% for the privilege of extracting needed equity.
I have not heard grumblings from my customers that have credit scores around 800. I see their loans pushed through quickly and easily with little fuss or muss.
Institutional lenders seem to have the best rates and terms lately. Mortgage bankers and brokers may be more helpful for borrowers that have less than top tier credit scores. Contact me for help or additional information.
530-224-6767 or n530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
