Cash-In Refinancing For Your Salem Oregon Real Estate
During the housing boom millions of Americans were taking advantage of "cash-out" refinancing to pay for home improvements, cars, boats, etc. In today's economy, however, money is flowing in the opposite direction, and "cash-in" refis, where homeowners bring money to the closing table, are on the rise and are at their highest level since the 1980's.
For owners of Salem Oregon real estate who have extra cash, cash-in refinancing has definite benefits, including:
Easier loan approval: By bringing in extra cash, borrowers can reduce their total loan amount, thus improving their loan-to-value (LTV) ratio and increasing their chances of qualifying for refinancing.
Elimination of necessary private mortgage insurance (PMI). The PMI is required of all homebuyers who have a down payment of less than 20%, and it generally costs about 1% of the loan amount annually. Bringing cash to the table to reach the 20% minimum will eliminate the need for PMI.
Escape from an underwater situation: Lenders will not refinance your Salem Oregon real estate if you owe more than your property is worth and an underwater situation exists. However, if you can bring enough cash to closing, you can pay down the loan balance enough to eliminate the negative equity and thus refinance yourself out of the underwater status.
Better interest rate: Because you will qualify for a lower interest rate if your LTV rate is below 75%-80%, bringing cash to push you below that threshold certainly makes sense. In addition, since CD's are currently earning only about 1% interest, and the stock market is erratic at best, homeowners who put their extra cash toward their mortgage and save money on their interest payments stand to gain approximately five times more in savings.
Reduction of mortgage term: For Salem Oregon real estate owners who wish to shorten their 30 year mortgage to a 15 or 20 year one, adding extra cash to reduce the loan amount can make the increased monthly payments more bearable.
As with all financial matters, there are, of course, caveats. Cash-in refinancing is not a viable course of action for you if:
you plan on staying in the property for less than 5 years. Because of the expenses associated with refinancing (attorney's fees, title search, etc.), cash-in refis can take you as long as four years to break even. Here is a helpful refinance calculator.
your credit score isn't great. If your score is below 689, there is a very good chance that you won't get a low enough interest rate to make cashing-in worthwhile.
you are strapped for cash. If participating in a cash-in refinance would leave you with no emergency fund, you should discard the idea.
While cash-in refinancing may sound appealing to you, it is important that you assess your current financial situation, figure out how long it will take you to benefit from such a move, and realistically determine if this option is a reasonable one for you.
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