Cash Out Refinances: A Memory of Past Times

Well, almost. They are still around, but much harder to get and you will leave a lot more equity in your home than in years past.

Home equity lines of credit (HELOCs) were the easiest and most common ways to tap into the equity in your home; and going to 90-100% of the home’s value was not uncommon. Now, it’s unheard of. Most banks will still offer a home equity line of credit, but only to 75% of your home’s value. The reason: as home values fall, the HELOC is in second position to the first mortgage, so in case of default, the second mortgage holder gets little or nothing of their principle back. And banks don’t like to lose.

Take a look at this chart, showing the falling equity in our homes, then let’s talk about the options for a cash out refinance.

But if you are looking to do a cash out refinance of your home, the best options are

A conventional loan – and you can borrow up to 80% of the value of the home. Why not higher? Well, because over 80% LTV you would need Mortgage Insurance, or PMI. And no MI companies will insure a cash out refinance. So you’re capped at 80%.
An FHA Loan – Which is probably your best option. You can do a cash out refinance up to 85% of the value of your home. And in Atlanta, that means a max loan of $346,250. And at 85% LTV, that would put your home value at about $407K.

The options are still there; just not as prevalent as they used to be. But if you are looking to pull cash out of your metro Atlanta home, then give me a call.