What you need to know about Texas cash out refinances
By utilizing a Texas cash out refinance homeowners can tap into their homes equity and very low interest rates. Because Texas has very unique home equity cash out refinance laws we have put together a list of frequently asked questions regarding Texas home equity mortgages.
In recent years many Texas homeowners have elected to pay cash for their home purchases. This is due in part to the very competitive nature of the Texas real estate market whereby paying cash could help one secure the home they wanted. Home values have risen greatly and now homeowner’s equity is rising as well. While having a home paid for is truly a great feeling it may not be the best use of one’s financial resources.
To receive your free customized Texas cash out refinance quote please give the Richard Woodward Mortgage Team a call today at 214-945-1066 or complete an online application now.
Answers to frequently asked questions about Texas Cash Out
I want to refinance and get some cash but the loan officer says the max he can lend is 80% in Texas. Why is that?
This restrictive ruling that limits the loan to value to 80% is actually part of the Texas Constitution (see section 50 (a) (6) article XVI). County records identify the fact that the home has had a home equity lien filed against it. This will be the case until the current Home Equity loan is completely paid off. So if you are in the process of refinancing your current loan make sure you tell your loan officer if you have ever completed a home equity loan or cash out refinance. Current law limits Texas homeowners to only one home-equity loan at a time. What is the maximum loan to value on a cashout loan? In the state of Texas cash-out and home-equity loans for homestead properties are restricted by the Texas Constitution (see section 50 (a) (6) article XVI). This article restricts cash-out loans to a maximum loan-to-value or combined loan to value (LTV) of 80%. In other words, if your home is worth $500,000 the maximum allowed loan on the home would be $400,000. If the home is not designated as a homestead or primary home, the maximum loan-to-value is usually 90%.
Are there any restrictions on what I can use the money from a Texas cashout?
NO. You can use the funds for whatever purpose you desire. Many Texas homeowners use a Texas cash out refinance to consolidate debt of higher interest rate credit card debt, pay for college education expenses, make a down payment on an investment property, or just invest the money into other resources. How can Service First Mortgage roll all my bills into one monthly payment? If you have equity in your home your loan officer can show you how you can payoff your outstanding loans and credit card balances and roll them into one low monthly payment. Not only does this alleviate the hassle of having to pay individual creditors but you most likely will be lowering the interest rate charged by your creditors. Most credit card companies charge between 8 to 21 percent interest on their loan balances. Compare that to a home equity loan in the single digits and the savings are impressive. In most circumstances your new Texas cash out mortgage interest may be tax deductible. Contact your accountant or CPA to confirm this. Ask your loan officer about our home consolidation loan and start saving money today.
I’ve been told that the lender will pay all fees on my cashout. Is that true?
YES and NO. First off, in Texas, this was true normally only for subprime cash-out deals. Since there really aren’t any subprime mortgages anymore those types of loans are pretty much gone. However, if the amount of funds that you need is very small a home equity line of credit may be better suited for you. A line of credit generally has very few fees. Secondly, new lending guidelines imposed by the Consumer Finance Protection Bureau make it very difficult for lenders to pay your fees. In addition the fees for your title policy, appraisal, title company fees and the lender fees are all fees that someone has to pay. Lenders may agree to pay all or a portion of the fees, but be aware that if the lender pays such fees, the cost is usually passed on to the borrower in a higher interest rate to compensate. This may not be the best option for you. Your loan officer will provide you options and you can determine which one best suits your needs.
Why is it that I cannot pay more than 3% in fees for a Texas cashouts?
A cash out loan will involve many of the same fee as a regular purchase money loan or a rate and term refinance. Texas constitution states that the total of all fees on a cash-out or home equity loan for homestead properties may not exceed 3%. This is commonly referred to as the 3% rule. Normal fees include origination, lender fees, points as well as attorney fees, title insurance, escrow fees, recording fees, survey, etc. In other words, if you want a $50k home equity loan third party fees may not exceed $1,500. This is why sometimes it is difficult to complete a home equity loan without the need to have a lender pay your fees on your behalf (see “I’ve been told that the lender will pay all fees on my cashout. Is that true?”). Ask your InterLinc Mortgage loan officer if your situation allows for a buyout of third party fees.
What should I know about my cash out loan?
The state of Texas is unique when it comes to cash out or home-equity loans. Unlike most states, Texas allows a home owner to only borrower up to 80% of their home’s value. This is meant to protect home owner’s equity. In addition, all Texas cash out loans require that you cannot close until 12 days have passed since you made application. Furthermore, after closing of your home equity loan, Texas constitution requires a 3-day rescission period in which you may terminate the loan without obligation. Another very unique nuance to the Texas Cash out home equity loan is that you can only have one cash out loan at a time and that once you have taken out a cash out loan all subsequent loans used to refinance that loan must be structured as a cash out loan. Ask your loan officer for a copy of “the 12-day letter” and explanation of your rights.
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