Real Estate News Real Estate News

FHA Curbs Cash-Out Refi Limits


Written By: Jaymi Naciri
Wednesday, August 21, 2019

ldquo;Refinancing your mortgage to take cash out using your homersquo;s equity may not be as easy to do under new limitations on cash-out refinances >

The previous loan-to-value LTV limit on cash-out refinances was 85; effective for loans on or after September 1, 2019, HUD is lowering the requirement to 80. This change ldquo;seeks to mitigate riskshellip;associated with increasing levels of insured loan balances on cash-out refinance mortgages,rdquo; said HUD in a Mortgagee Letter announcing the change. ldquo;This new requirement is a prudent safeguard that permits FHA to ensure it stays ahead of any shift in housing stability.rdquo;

The last time HUD adjusted the max LTV for cash-out refinances was back in 2009, when they set the current benchmark of 85 ldquo;in response to the weakening housing marketrdquo; and in recognition of a rapid increase in ldquo;the share of cash-out refinanceshellip;as housing prices increased through the mid-2000s. Subsequent studies have shown that a significant increase in foreclosures may have been the result of a high number of cash-out refinances completed prior to the collapse of the housing market,rdquo; they said. Prior to that shift, homeowners could tap up to 95 of their home equity.nbsp;

The letter also noted that FHA cash-out refinances have swelled by more than 250 from 2013 to 2018, HUD reported. There were more than 150,000 of these transactions last year. ldquo;Cash-out refinances comprised 64 of all FHA-insured refinance transactions, up nearly 39 from the year prior,rdquo; said Realtor Magazine. ldquo;The increase in home prices has prompted more cash-out refis, according to the annual Report to Congress issued last fall.rdquo;

Cash-out refinances are a popular option among homeowners whose houses have appreciated because, while rates vary depending on many factors including the strength of the borrowerrsquo;s credit, the money is often less expensive than in other types of lending. And, if the money is used for smart updates or improvements, it can increase the homersquo;s value and provide some safeguards should there be market adjustments.

ldquo;This option can be beneficial to consumers who have seen the value of their home rise in recent years,rdquo; said Bankrate. While many financial experts caution against taking too much money out of your homemdash;and this move by the FHA is intended to help keep owners from ending up under watermdash;ldquo;Taking the money from the cash-out refi and putting it towards paying down high-interest debt or home repairs can be a financially sound decision.rdquo;

nbsp;



Copyright© 2019 Realty Times®. All Rights Reserved

 

Friday, December 6, 2019

You Dont Need 20 Down and Seve...
You need to be well-established in your forever careerThere has been a lot of discu...

Are You Buying For The Right R...
In the push to buy, have you stopped to decide what is driving you into homeownership in th...

Copyright ©2019 - Realty Times®
All Rights Reserved.

Denver Restaurant Week 2018 is Here! Check Out Our Guide to the BEST Dining Deals!
It’s that time of year when the most celebrated restaurants in Denver invite foodies...

Happy Valentine’s Day from Turner Associates! Check Out this Romantic Valentines Food and Drink Guide to Impress the Sweetheart in Your Life!
Love is in the air! Today lovebirds across the country take time to celebrate that special...

Visit Our Mobile Site
Facebook twitter