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Do You Need a Cashout Refinance?

If you are in need of cash and would like to refinance your property to pull out some of your equity, there are many loan  options for you.  Some of the loans available will allow you to pull out up to 95% of the value of  your home, the home equity loans will allow up to 100% cashout.  Below are a few of the loan options available.

1.) If you have good credit, you can refinance into a fixed rate up to 90% - 95% loan to value. The 95% LTV  loan program is available on a 30 or 15 year amortized loan programs.  The 90% LTV program is available on a 30 year amortized, 15 year amortized, or a short term fixed rate for 3,5,7 or 10 years.  The short term fixed rates have lower rates than the 30 year amortized loans.  If you still want a lower payment, many of these loans are available with an interest only payment option. If your credit is not very good, there are many cash out loans available for your situation.  Please feel free to contact us by email or call us at 818-920-1600 to discuss your credit scenario. 

2.) If you do not need a lump sum of cash, but need to improve your monthly cash flow, then a Pay Option Arm may be a good loan for you.  These adjustable rate loans have the possibility of negative amortization.  Negative amortization happens when you make the minimum monthly payment and not the actual note rate (index + margin, in most cases) on your loan. The note rate is usually much higher than your minimum payment. The difference between the note rate and your minimum payment gets added to your mortgage balance each month.  By having a low minimum monthly payment, this frees up cash each month for you to have available for your personal needs.  Please see below for an example:

The first Pay Option Loan is a straight negative amortization loan with a start rate as low as 1%.  The payment starts at 1%, but after the first few months, that actually interest rate charged to the borrower is the note rate.  This is usually calculated by adding the index and the margin together.  This rate can change monthly.  When you receive your monthly statement, you usually have four different payment options.  The minimum payment, interest only, a 30 year amortization payment, and a 15 year amortization payment.  If you choose to make the minimum payment, then the difference between your minimum payment (in this instance it is 1%) and the note rate  is added to the balance of the loan.  So, if you have a $400,000.00 loan, the minimum payment would be $1286.55.  If the actual note rate on this loan is 7.5%, then the note rate payment charged every month would be $2500.00.  The difference between the two payments is $1213.45.  This is the amount that would be added to the balance.  The maximum negative amortization is 115% of the original loan balance.  The loan is recast after 5 years or immediately if the negative amortization reaches or could exceed 115%.  This could be a great loan to improve your cash flow, but keep in mind that over time your equity in the property will decrease. 

The second type of Pay Option Arm has a fixed note rate.  These loans usually have a minimum start rate of  2 - 3%.   The minimum payment is usually fixed for the first 5 years.  This loan works the same as the above loan except the note rate does not change monthly.  So, the negative amortization is always based off the fixed note rate for the first 5 years. Please feel free to contact us by email or call us at 818-920-1600 to discuss the above loan options.  If you would like to apply for a cashout refinance, please click here .

3.)  If you have a very low interest rate 1st Trust Deed and you do not want to refinance that loan but still need cash out, a home equity loan is another option.  A home equity loan is usually an adjustable rate loan based on the Wall Street Journal Prime Rate.  Please see below for the home equity guidelines.

If you would like to apply for a new loan, please click here.  If you would like to discuss your own personal situation, please E-mail us or call 818-920-1600. 

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