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I have a mortgage balance of $120K and a HELOC balance of $34K for a total of $154K. My goal would be to cash out and/or consolidate both balances into one loan.
Assuming the appraised value of the home comes in at $180K, it means that the maximum loan amount I could get (assuming I qualify) is $180K x 85% = $153K only right?!
Moreover, conventional cash out refinance would be no better because the maximum refinance loan allowed is even lower at 80% of the appraised vaule right?! This mean I could only get (assuming I qualify) $144K right?!
My primary question is would I still be ALLOWED to refinance even though the max refinance loan amount is lower than the combined mortgage and HELOC balance?
I understand this would not make sense for some people, but again my goal would be to consolidate into one loan payment.
Finally, the subsequent question I have is what down payment is required for the FHA cash out refinance and likewise for the conventional cash out refinance?

smithsussane · Posted: Sat Nov 21, 2009 12:46 am Post subject:

Hi Guest!

Welcome to forums!

You will be able to refinance both the mortgages into one provided if you've equity in the property. You need to contact your lender and check out whether or not he would approve you for a loan. For a FHA loan, you would require a downpayment of 3.5% and for conventional loan, you would require a downpayment of about 20%.

Feel free to ask if you've further queries.

Sussane

gmakerley · Posted: Sat Nov 21, 2009 1:14 pm Post subject:

sussane, that's not right.

guest, if you can borrow $153K on an fha loan, you'd be responsible for coming up with closing costs, plus whatever sum is needed in order to pay off the remainder of your two combined mortgages. there is no such thing as "down payment" on a refinance.

similarly, with a conventional loan, you'd have to pay any excess on the debt being paid off, plus closing costs.

Guest

Thank you for the clarification gmakerley. What then would be the approximate average closing costs or percentage for said FHA loan?

jveenstra · Posted: Mon Nov 23, 2009 7:03 am Post subject:

Conventional mortgages treat consolidating a first and second mortgage as cash out if the second mortgage (HELOC) was acquired after purchase. If you got the second mortgage the same time as you got the first mortgage when you acquired the property, it could be a rate and term refinance.

You do not want to consolidate both mortgages if it is a cash out refinance and the new mortgage would be over 80% of the appraised value.

You may not want to consolidate both mortgages even if it is a rate and term refinance and the mortgage is over 80% of the appraised value because then you will need private mortgage insurance and that monthly payment could be counterproductive to the refinancing goal.

FHA cash out refinances go to 85% of the appraised value. While that may work, you will have an up front mortgage insurance premium of about $2,700 and monthly mortgage insurance premium. Depending upon you goal and overall situation, that may or may not be a worthwhile exercise.

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FHA Cash Out Refinance, can it happen for me?