October 1, 2024
The Fed announced a substantial rate cut in 2024. That action has more homeowners thinking about their refinance loan options and how they can take advantage of potentially lower rates to come.
Refinancing helps some borrowers save money in interest payments over the long term. It can also, depending on circumstances, help you get into a lower monthly payment. Once rates have fallen to the right levels (for some borrowers) these options get more realistic than they have been in the past two to three years.
Refinancing can also result in cash back to the borrower once the original loan has been paid off and the associated closing costs dealt with. Not every refinance loan offers this, but FHA loan programs do include cash-out options.
If you need to refinance your home loan because you want cash out, your loan will be much different than the type of mortgage refinance designed to lower your monthly payment.
If you need a lower monthly payment on an existing FHA mortgage, or if you need to get out of an adjustable rate loan (FHA or non-FHA) and into a fixed-rate mortgage, there are FHA refinance options for you.
Be sure to explain to your loan officer that you want a specific outcome (cash back, lower payment, ditching your adjustable rate mortgage for a fixed rate loan) from your loan.
Refinancing For FHA And Non-FHA Mortgages
Some FHA refinances including cash-out refi loans, simple refinances, rate-and-term refinances will apply to any mortgage, FHA or not.
Depending on the terms you and the lender agree to, refinancing your conventional loan or other non-FHA mortgage may provide cash out but if you need lower payments ask your loan officer which option will help you get closest to your financial goals for the loan.
For FHA-to-FHA refinances, borrowers have more options including an FHA Streamline Refinance which allows no cash back to the borrower but normally must result in a benefit such as a lower payment or lower interest rate.
FHA Cash-Out Refinance loans are possible for both FHA and non-FHA mortgages but the age of your loan will be an important factor. Ask your lender if cash out is right for you based on the number of mortgage payments you have made and the potential equity that has built up or has yet to build up.
The Age Of Your Loan
Most FHA refinance loans require you to have made at least six mortgage payments (you may be required to wait as long as 12 months before you can apply for certain refi loans) but in any case the older your mortgage is at application time the better for borrowers who want cash out.
You are required to have at least 20% equity in the home to be approved for a cash-out refinance loan based on a new appraisal, which is always required for these loans.
Refinance loans can include 15-year and 30-year options. Borrowers don’t have to choose a cash-out option when refinancing out of non-FHA mortgages–ask your loan officer about simple refinances, rate-and-term refinancing, and other choices.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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