Cash out Refinance loans are home mortgage loans where borrowers get cash back at closing after paying off any liens, any closing costs, and the first mortgage. In Florida, the maximum amount of loan of any owner-occupied cash-out Refinance loan cannot exceed 80% of the loan-to-value, LTV or the property value. Some of the reasons why most people take advantage of the Florida cash out loans include home improvements, taking a vacation, funding a college education, consolidating debt, or having some extra cash on hand.
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When the homeowner Refinances the existing mortgage and gets the cash back at closing, the mortgage is considered a cash-out Refi loan. The title will always reflect the mortgage as cash out for the rest of the loan term. The homeowner can refinance the loan in the future but the cash out rule will continually apply to the following mortgage loans. However, it is imperative to know that the rule changed effective from January 1, 2018. Florida Mortgage Pros will offer more insight into these changes below.
Cash Out Refi Rates in Florida
Basically, the mortgage rates for the cash out Refi loans are a bit higher than the rate and term Refi loans. The equity is pulled out of the home in the form of cash back to the borrower. The rate and term Refi Refinances the existing mortgage with short term, lower monthly payment, or lower rate. The total closing costs cannot surpass 3% of the loan amount and this rule applies to the following mortgages after the first cash-out-loan. So, the rate rule, the 80% loan to value and the 3% closing costs rules will apply. There are several requirements for a homeowner to qualify for cash-out Refi loan:
- The borrower must have 6-month ownership of the property being financed
- Borrowers are required to wait 12 months between the cash-out loans
- All liens on the property must be paid off on closing
- Terms for Cash out Loans
The fixed rates are eligible for a 15-30 year term, and so are 7 and 10-year adjustable rate mortgages. The Florida cash-out Refinance does not permit for 3 or 5-year adjustable mortgage rates. The new changes made in 2018, apply to all home equity and home equity loans for Refinanced on or after the changes were made. The major changes that were made include:
- Reducing the fee cap from 3-2% with certain fees not included in the 2% fee cap. This implies that the total fees for the Refinance loan cannot exceed 2% of the total loan amount. However, third-party fees are not included. The fees exempted from the 2% fee cap include:
- A property survey by a state licensed or registered surveyor
- An appraisal that is performed by a 3rd party appraiser
- If a mortgagee title policy is not issued, a title examination report if its cost is less than the state base premium for the mortgagee title policy without endorsements
- A state base premium for the mortgagee policy of title insurance with endorsements that are established according to the state law
- Getting rid of the provision prohibiting home equity loans on properties that have agricultural exemption other than dairy farms. The lenders can close section 50(a)(6) loans on properties with an agricultural exclusion in place at the closing time.
- Repealing the 50% ceiling placed on additional advances under the Home Equity Lines of Credit. The new changes do away with the subsection 50(t)(6) which prevents additional advances on a HELOC if the principal amount that is outstanding on the HELOC surpasses 50% of the fair market value of the home on the date the HELOC was established. However, the 80% fair market value cap is not affected by the repeal of the aforementioned subsection 50(t) (6).
- Allowing, under special conditions, a home equity loan to be refinanced as a non-home equity loan. The new changes permit the owners to Refinance the home equity loan as a non-home equity Refinance loan under Article XVI, subsection 50(a) (4) if:
- No additional funds are advanced other than the funds advanced from the initial transaction
- The Refinance is not closed before the first anniversary of the date the home equity loan was closed
- The lender gives the owner a written notice that is prescribed by the proposed subsection (f) (2) (D) on a separate document within three business days of application and at least 12 days before the closing of the Refinance.
- The principal amount of the Refinance, when added to the total of the outstanding principal balance on the loan, does not exceed 80% of the home’s fair market value during the Refinancing time period.
- Amending the 12-day Notice Disclosures set for 50 (a) (6) loans. The addition of the provision states that “fees and charges to make the loan may not surpass 2% of the loan amount. This is only in exception of a charge or fee for an appraisal done by a 3rd party appraiser, a state base premium for a mortgagee policy of title insurance with endorsements, a property that is surveyed by a state licensed or registered surveyor, or a title examination report.
- Updating those authorized to make home equity loans. The subsection states that the subsidiaries of the banks, savings and loan associations, credit unions and savings banks doing business under the laws of the United States can make home equity loans. This subsection replaces the term broker with a mortgage company or banker further clarifying that a registered mortgage banker and a licensed mortgage company can take home equity loans.
Florida Mortgage Pros will shed more information on cash out Refinancing loans and the best options for you. Contact us today for a free quote.