In a cash out refinance, determine the balance of your
mortgage, and the amount of cash you are taking out plus any closing
costs. The total is your loan amount. An appraiser will determine
the value of your property which will be used to determine your Loan
to Value (LTV).
One way to make a refinance work for you is to
refinance for more than the balance remaining on your old mortgage
-- in effect, tapping your home equity, or "cashing out," . Thanks
to favorable rates, you may be able to do so without increasing your
monthly payment.
Cash Out Second Trust Loan
A second trust loan can be a very useful tool if you
have a low rate first trust but still want to use some equity in
your home.
Some useful Second Trust programs include:
1)A traditional second allows you to borrow up to 95%
of your appraised value. The program allows a debt to income
ratio (use this calculator to find out your debt ratio: Debt To
Income Calculator) of up to 45%. If your ratio is too high, some
debt can be paid at closing lowering your ratios.
2) An expanded second trust allows you to cash
out up to 100% of your appraised value. Please note that your
interest rate will increase as the loan to value
increases.
3) A 125% second trust allows borrowing up to
125% of the appraised value of your home.
Take the value of your property, multiply by 125% and
subtract the balance of your first trust. The result is the total
you can borrow. With the recent increase in values expected to
continue, many homeowners will see enough increase in value to cover
the amount borrowed in a very short time. Not available on
investment properties at this time.
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