Gain financial freedom: FHA Cash-Out Refinance

With interest rates at current lows, now’s the perfect time to wipe away your high interest debt for a clean start or pay for other expenses such as medical debt, home improvement, student loans or any other major expenses that you need paid. Examples of high interest debt that can be paid:

Credit Cards, HELOC’s, Auto Loans, Motorcycle Loans, Boat Loans, Business Loans, Any Loans! 

With an FHA Cash Out Refinance, you access up to 85% of your homes value to pay off your high interest debt or get cash to use any way you choose to. And the best part of consolidating your debt into an FHA loan, The interest is tax deductible! 

FHA Cash-Out RefinanceThat’s right, everything that you pay in interest you can deduct. You wont see that for credit card debt, auto loans or student loans. Look at this example of how much money you could save even before deducting your interest:

Estimated Interest Rate 
Current Balance 
Monthly Payment 
Credit Card
23%
$17,000
$680
HELOC
12%
$25,000
$358
Car Note
9%
$15,000
$399
Current Mortgage
7.5%
$180,000
$1,258
Total Debt
$237,000
$2,695
New FHA Mortgage
5%
$237,000
$1,272
(*5.126% APR)
Monthly Savings With a New FHA Loan
$1,423
Yearly Savings With a New FHA Loan
$17,076

WOW! Now also look at the potential tax deduction:

Tax Deduction 
Year 1
$11,770
Year 2
$11,591
Year 3
$11,403

(Calculated on $237,000 Loan, 33% Tax Bracket)

Imagine the financial freedom that saving this much money can bring to you. Freedom from credit card debt and creditors, freedom to renovate your home, freedom to pay off medical expenses or student loans, even freedom to buy a car, boat or motorcycle and deduct the interest for the new loan. Since interest rates won’t stay this low forever, it doesn’t pay to wait.

What is a Cashout Refinance and how much can I refinance?

The maximum FHA Cash-Out Refinance loan amount is determined by:

  • Maximum Loan Amount: The maximum FHA refinance loan amount varies from county to county. The highest maximum FHA refinance amount right now is $636,150. The lowest maximum amount available in any county is $275,665. Check FHA limits in your city, county or state here.
  • Maximum Financing: The maximum financing for an FHA Cash-Out Refinance 85% of the current appraised value for the property. 

What determines if I’m eligible for an FHA Cash-Out Refinance?

To be eligible for an FHA refinance loan, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) can’t exceed 31 percent of your gross monthly income (31% top ratio). Because your credit background will be fairly considered, a FICO credit score of 620 or above is usually required to obtain an FHA approval. In addition, you must have enough income to pay housing costs plus all additional monthly debt (43% bottom ratio), although these ratios can be slightly exceeded with compensating factors. Learn more about FHA refinance loan requirements.

Can I get an FHA refinance loan after bankruptcy?

If you’ve been discharged from a Chapter 7 bankruptcy for two years or more, you’re eligible to apply for an FHA refinance loan. In addition, if you’re in a Chapter 13 bankruptcy, and have made all court approved payments on time and as agreed for at least one year, you’re also eligible to make an FHA loan application.  Learn more about FHA loan guidelines for bankruptcy.

*Interest rates are simply the price of funds available for borrowing and lending. As with other prices, current interest rates are set by forces of supply and demand. The equilibrium interest rate, or price of loanable funds, is the one at which the quantities of such funds demanded and supplied are equal.

The interest rate above is the national FHA Mortgage Rate, updated 02/11/2009. These are indicative rates only and therefore not meant to be any type of guarantee of rates currently available.

Please note that the rate and payment provided in the figures above are assuming the following: all closing costs paid, LTV of 80% or less, and credit score over 700 points. The quote is in no way indicative of the rate you may qualify for, nor is it intended to constitute investment advice. Please contact a mortgage specialists or fill out a pre-qual application so that a certified loan officer will review and obtain the best possible rate and payment for your situation.

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