Cash out laws on refinancing in Texas
The need for refinance is to simply pay out the current loan and attain lower rate of interest compared to previous loan rate of interest. Refinancing is taken when the person is facing several financial crises and cannot meet his financing requirements like monthly payments to creditors. This type of financing will help the individual to meet all his immediate finance needs.
There are two types of refinancing on mortgage, one is rate and term refinance. In this type of refinancing cash is not pulled out to meet your immediate financing needs but it is used for lowering the rate of interest and term of loan. This type of refinancing is used when there is huge drop in interest rate and any one can take benefit of this type if the present loan interest rate and new loan interest rate differs by minimum of 1%. For ex: if you have a mortgage at 6% and the term of 30 years then you can modify the loan’s rate of interest if it can reduce the rate of interest rate to minimum 5%. This type of refinancing is apparent when there is mortgage rate drops very low.
The second type of refinancing is cash out refinancing in this case you can pull out cash from your home mortgage in addition to lowering the rate of interest and terms. Laws related to cash out refinancing in Texas sates that loan amount cannot exceed 80% of home’s appraised value. Previously Texas law restricts the ability to pull cash out of home for only once but now it allows this as long as the loan meets the criteria.
How the 80% cash out rule is calculated? This law specifies that a new refinancing loan cannot exceed 80% of the home’s appraised value. For ex: if your home’s worth of $100,000 and the current mortgage is $40,000 then you can refinance up to $80,000 on new loan. This gives the borrower $40,000 an extra amount that can be used to meet the immediate finance needs.
12 days rule: this is one of the unique rules related to Texas. when you apply for cash out refinance then your loan officer or mortgage broker will ask you to sign a 12 day form. This rule states that loan cannot get approved until 12 days from the date of application.
3% rule: this rule specifies that total fee for processing the loan cannot exceed 3% of the loan’s value. This fee includes broker, survey, appraisal, documentation, underwriting and title. This law is intended to protect the borrower from being charged extra by the companies but it is actually disadvantage to small amount of loan borrower making it difficult to take advantage of their home equity.
3 day rule: this rule specifies that if the loan gets approved by the 12th day through refinancing company, it requires more three days for Mortgage Company to release funds to the borrower. It means that you will not receive funds from refinancing companies until 3 days after approval.
It is important that your mortgage professional is experienced with rules of Texas because home equity loan having so many rules.
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3 Responses to “Cash out laws on refinancing in Texas”
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The information is very helpful, by knowing the rules of the state in which we are going to refinance is of most important. One must make decision of refinancing based on how many years you are going to stay in you home. Refinancing can be done for two things, one for modification of rate and term, in this you don’t pull out any money out of refinancing and other is cash out refinancing where you can pull cash out of refinancing. But in Texas you must decide refinancing based on the rules because Texas does not allow you refinance more than 80% of your home equity. One must know their home equity before taking decision of refinancing.
As with any state, Texas has its own rules for refinancing, according to it, does not allow to refinance more than 80% of the home equity, it means if your mortgage is more than the 80% home equity it does not allow you to refinance. For example if your home worth of $100000 then according to Texas rule you can refinance up to $80000, and if you have mortgage of more than $80,000 then you are not eligible to refinance your mortgage. One must always aware of the state rule related to cash out refinancing before you opt for refinancing your mortgage.
I need some help. I live in Texas; I refinanced my home on Nov. 2006 and pulled cash out. The mortgage company advised me that I wouldn’t be able to refinance for 12 months. In 2008, i tried to refinance with the same mortgage company but was told I had an A6 loan and in Texas could not refinance until loan was fully paid. I think that kills the point to refinance. can anyone shed some light and point me in a direction to go becasue this mortgae company is just not working with me.