As of a couple months ago, not only FHA but also Freddie Mac discontinued their 85% Loan to Value cash out refinance program and limited all transactions (cash out) to 80%. Assuming they are doing this because they have determined the risk level is higher on those products and possibly the default rate. This coincides also with the automated underwriting system sometimes not approving loans that still do meet the guideline criteria to qualify.
Are there any options out there that are reasonable for a 85% loan to value cash out refinance? Yes, there are.
The options available for this high LTV cash out refinance are not going to be considered conforming loans, they would fall into the Non-QM (Non-Qualified Mortgage) which still has amazing terms available. I ran an example on this earlier today and the scenario is below:
471,000.00 - Value
400,000.00 - Loan Amount
Single Family Residence/Owner Occupied
85% Loan to Value
Cash Out Refinance
760 FICO (Ran for simulator purposes)
10/8/2019 - Rates of course subject to change based on market and other aspects
Option 1: (Available if you're paying off debt, cash directly to you isn't allowed)
30 Year Fixed (5/1 & 7/1 ARM's available at a lower rate)
Interest Rate: 5.625 - no points, lender fees 1695 + title, escrow...etc
Interest Rate: 5.00 - 1.1% points, lender fees 1695 + title, escrow...etc
*This product does NOT include mortgage insurance*
Option 2: (If you strictly want cash out to you)
30 Year Fixed (5/1 & 7/1 ARM's available at a lower rate)
Interest Rate: 6.125 - no points, lender fees 1695 + title, escrow...etc
Interest Rate: 5.625 - - 1% point, lender fees 1695 + title, escrow...etc
*This products also does NOT include mortgage insurance*
Option 3: Renovation Home Loans!
If you're looking to just do improvements to the home, you can exceed the 85% threshold with a renovation home loan in many cases because the appraised value is based on what the property will be worth after the repairs are made. This is a great option if you don't need the cash but want to improve/update/fix your home.
Ultimately, even though the government and conventional loan options aren't available...There are still ways to get the cash out refinance with favorable terms depending on your credit profile. Please let me know if you have any questions about these products I would be happy to answer them.
Here's my direct contact information: [email protected] or 619-379-8999
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