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

 

Facebook linkedin twitter youtube googleplus instagram
Map SearchClick here for a free Market AnalysisBuyers: Search here for your Dream HomeSubscribe! Sign up to recieve our Newsletter!Real Estate Outlook
Updated: Wednesday, October 16, 2019


Trend Alert: Socially Conscious Real Estate on the Rise

The pull is stronger among some demographic groups than others, with millennials largel...
> Full Story

The Basics of Mortgage Fraud

In the interest of protecting the typical consumer, we put together a brief post about the basics...
> Full Story

Improved Canadian Housing Data Helps With Real Estate Decisions

Yoursquo;ve probably heard this one before: ldquo;There are three types of lies ndash; lies, damn...
> Full Story



Copyright ©2019 - Realty Times®
All Rights Reserved.