5 best cash-out refinancing lenders in 2021 • Benzinga
Want to jump straight to the answer? The best mortgage lender for most people is absolutely New American funding.
If you have built up equity in your home, you can borrow against it with cash flow refinancing. How do you decide on the best option? Discover in this guide the best cash-out refinancing lenders.
What is cash-out refinancing?
With a withdrawal refinance, you replace your current mortgage with a new loan. The new mortgage is for a larger amount than your current mortgage mortgage, and you get the difference. You can use the product for whatever you want. Many borrowers use withdrawal refinances to:
- Renovate their house
- Pay the tuition fees
- Consolidate High Interest Debt
How much can you cash out? It is based on the equity in your home. Your equity is the difference between the value of your home and the amount you owe on your mortgage. If your home is worth $ 300,000 and your mortgage balance is $ 200,000, you have $ 100,000 in equity in your home.
With most cash refinances, you must leave at least 15% of the equity in your home. With the example above, 15% of equity is $ 45,000, so the maximum you could withdraw is $ 55,000 ($ 100,000 – $ 45,000 = $ 55,000). VA withdrawal refinances are the only loans that allow you to withdraw all of the equity in your home.
The loan amount would be your mortgage balance plus the amount you want in cash. You can also include a stamp to cover closing costs.
Let’s say you wanted to do $ 20,000 renovations to your home. Using the example above, you can apply for a refinance of $ 225,000 – $ 200,000 to pay off your mortgage balance, $ 5,000 for closing costs and $ 20,000 for renovations. You will receive the $ 20,000 in the form of a check a few days after closing.
Cash flow refinancing vs refinancing
Of course, you don’t have to withdraw funds when you refinance. You can also simply refinance for a better rate and / or better terms. With all refinances, you have to pay closing costs, so you want to make sure that the change is worth it.
A lower interest rate can save you thousands of dollars over the life of your mortgage, so if you can find a considerably lower rate, refinancing may be worth it.
If you have an adjustable rate mortgage, you can switch to a fixed rate mortgage (and vice versa). A fixed rate mortgage has an interest rate that never changes. A variable rate mortgage has an interest rate that the lender can change.
You can also refinance for a different mortgage term. Let’s say you have a 15 year mortgage. You decide you want lower payments, so you work with a lender and refinance into a 30-year mortgage. You can also switch from a long-term mortgage to a shorter-term mortgage to build equity and pay off your mortgage faster.
Cash-Out Refinancing vs HELOC
What if you are happy with your mortgage? Maybe you have an incredible interest rate or are about to pay off your mortgage. Refinancing with withdrawal may not be the right solution for you. In this case, you may want to access your equity by using another financial product like a Home Equity Line of Credit (HELOC).
A HELOC is a 2nd mortgage. Instead of a loan, a HELOC is a line of credit, which works much like a credit card. You have a maximum amount you can borrow, and you can borrow as much as you need up to the maximum. As you pay off what you borrow, you may be able to borrow more.
HELOCs have a draw period and a payback period. You can borrow from your line of credit during your withdrawal period. You usually have to make payments, but you may have the option of making small payments and only interest.
After your draw period ends, you enter the refund. During this phase, you cannot borrow against your line of credit and you must pay off your loan balance plus interest.
Keep in mind that a HELOC is a second mortgage, which means if you stop making payments, your lender could foreclose on your home.
Cash Refinance Loan Requirements
Just like with your current mortgage, you must meet specific requirements to be approved for refinance with withdrawal.
- Credit score. Your credit score is a 3-digit number that gives lenders an idea of how you’ve handled credit in the past. Credit scores range from 300 to 850. Refinancing with withdrawal typically requires a credit score of 620 or higher.
- Debt-to-income ratio (DTI). Your DTI ratio examines how your monthly debt payments, including your new mortgage payment, compare to your income. For example, if your debt payments (your mortgage, car payments, credit card minimums, personal loans) total $ 1,500 per month and your pre-tax income is $ 3,500 per month, you have a DTI ratio of 43%. Lenders look at this to make sure you have enough income to cover your commitments. You need a DTI ratio of 50% or less to be eligible for cash refinancing.
- Equity. You must have enough equity in your home that you can leave at least 15% equity in your home after refinancing (unless you qualify for a VA withdrawal refinance, in which case you can withdraw all of your equity).
Best Cash Refinance Lenders
To find the best mortgage rates, contact several lenders. Here are Benzinga’s top picks.
Avg. Loan closing days
1. Ideal for a quick close: LoanDepot
Waiting for a refinance loan to close can be stressful. After all, if you get refinancing with withdrawal, it’s because you need cash. LoanDepot has an average close time of 13 days which is fast.
LoanDepot is licensed in all 50 states. You can speak to a loan officer at their local branches, online, or over the phone. It has a strict no-direction policy, which means its loan officers have no incentive to pressure borrowers to choose one loan over another. Its priority is to help you choose the best refinancing option.
Avg. Loan closing days
2. Best service: Rocket Mortgage® by Quicken Loans®
Rocket Mortgage® by Quicken Loans® offers a user-friendly online platform that makes it easy to apply for refinancing. You can also access your claim on the go using the Rocket Mortgage® app.
It offers a solid learning center for you to learn more about the refinancing process, and the platform accesses your financial preferences and goals to get you the loan that best suits your needs.
Quicken Loans has award-winning, easy-to-access customer service. You can speak to credit experts over the phone or via chat whenever you have a question. It offers cash refinancing, interest rate and term refinancing, and investment property refinancing.
Avg. Loan closing days
3. Best for Veterans: Veterans United
United Veterans specializes in VA loans and refinancings. It ensures that it meets the needs of veterans and military personnel by having advisers from each military branch. It also offers 24 hour customer service so you can reach them if you are abroad.
Veterans United’s refinancing offers include Interest Rate Reduced Refinance Loans (IRRRLs), which help you take advantage of lower interest rates and cash refinances. You must be a qualified service member, veteran, or surviving spouse to use a VA refinance loan.
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4. Ideal online: Reali
Reali offers a mortgage online live. Its platform shows you multiple options so you can choose what works best. Your online dashboard lets you know the status of your request and you have a dedicated loan officer if you have any questions.
Reali allows you to lock in your rate in just a few minutes. It also doesn’t charge lenders a fee which can save you thousands of dollars. Reali offers interest rate and term collections and refinancing.
Avg. Loan closing days
5. Ideal for traditional banks: Bank of America
Bank of America offers the best of both worlds: a digital mortgage application as well as in-person assistance from loan officers. You can view its prices online, which makes comparative purchases easier.
It also offers a Preferred Rewards program to Bank of America banking customers who keep $ 20,000 or more in their accounts. If you qualify, you can save $ 200 or more on your setup costs. Bank of America offers FHA, VA, fixed rate, variable rate and cash-out refinancing.
Obtain withdrawal refinancing
The process of getting cash refinance is similar to buying a home. It might be a little easier than when you were a first time home buyer, but not a lot.
Your first step is to find a lender. The best approach is to contact at least 2 to 3 lenders for a quote. Take a close look at each quote, looking at the fees and the interest rate. Take into account the service offered by the lender and their responsiveness to your questions. Choose a lender that offers a competitive rate and excellent service.
Then you will complete an application. You will need to submit documents such as recent bank statements and pay stubs. Your lender will tell you exactly what you need. Your lender may also request an appraisal to assess the value of your home.
Once he has all the information, your lender will let you know if you have been approved. You will set a time to complete your closing documents. You will receive a check for your product 3-5 days after closing.
Start with our list of recommended lenders for a cash refinance loan today.
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You can work at your own pace and someone is always there to answer your questions, 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Try Rocket Mortgage®.