It is definitely possible to refinance up to 100% of your home's value. There are many programs and products that will enable you to accomplish this. But first you need to ask yourself why you would want to do this. Then determine if it is the best course of action. Here are a few reasons most homeowners would refinance the entire value of their home.
The homeowner is taking cash out in order to start or finish large home improvement projects. In this situation it makes sense since the equity you are utilizing is going to improve your home and ultimately increase the value.
The homeowner is consolidating a great deal of consumer debts into the home mortgages. This scenario is also beneficial if the debt being paid off carries higher interest rates than the mortgage rates obtained. Also now all that interest is tax deductible adding more value to the scenario.
Those are the 2 main reasons and there could be many more. It comes down to your individual situation and what works for you.
While you are searching for the perfect loan and rate keep in mind these 2 loan characteristics to aviod. With 100% financing you do not want to have either an ARM (adjustable rate mortgage) nor Interest Only.
An ARM is typically fixed for 2, 3 or 5 years and after that time the rate will adjust (in most cases it will increase). In addition to that the amortization schedule for a mortgage is front loaded with interest, meaning that in the initial few years of the mortgage you are paying down very little in principal. Therefore after the initial fixed portion of the loan you might not have built up enough equity to refinance again when you factor in closing costs.
The above logic works the same with an Interest Only loan. This loan you are only paying interest so no principal is paid at all. After a few years the principal loan balance is the exact same as you began. And if your ultimate goal is to pay off the loan then this product will not help accomplish that.
Finally with the current housing market neither of those programs are the best products. If your house were to depreciate after a few years then you owe more than the home's value (you are over-leveraged). This would eliminate any chance of you refinacing again or selling your home.
The best program to obtain is a 30 year fixed for both loans (or 15 year fixed if you can afford the payments) because you can keep these loans for a long time and not have to worry about a rate increase nor the principal not being paid down.
In conclusion a 100% refinance is not to be entered into without proper research and preparation. Remember to read our home refinancing basics to understand what you will be facing. Feel free to contact one our trusted lenders to have them review your situation and make suggestions to help your overall financial situation.
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It is definitely possible to refinance up to 100% of your home's value. There are many programs and products that will enable you to accomplish this. But first you need to ask yourself why you would want to do this. Then determine if it is the best course of action. Here are a few reasons most homeowners would refinance the entire value of their home.
Those are the 2 main reasons and there could be many more. It comes down to your individual situation and what works for you.
While you are searching for the perfect loan and rate keep in mind these 2 loan characteristics to aviod. With 100% financing you do not want to have either an ARM (adjustable rate mortgage) nor Interest Only.
In conclusion a 100% refinance is not to be entered into without proper research and preparation. Remember to read our home refinancing basics to understand what you will be facing. Feel free to contact one our trusted lenders to have them review your situation and make suggestions to help your overall financial situation.