Questions asked by mortgage brokers.... (interest rate, heloc, credit card, rate)

[westchester]

What questions are Mortgage brokers asking for refi and home equity...and why...Like what is the money for etc....what are the ? and the RIGHT ans...

[chet everett]

If you want a "cash out refi" the lenders are going to want to know why you want / need the money, as their recent experience shows that certain kinds of cash out refi are much more risky than others.

Basically if the money goes into anything that will NOT strengthen your ties to your home they are going to be much more careful about not letting your equity fall too low -- if you are using it for a new car, vacation, even debt consolidation their experience suggest such uses make it far more likely that you are going the wrong direction.

If instead your stated reason to extract equity seems to strengthen your odds of remaining in the house regardless of the potential of price drops to leave you underwater that would increase the odds of approval.

Absolute deal killers are to say "I want the cash to buy a new house", even if that house is a vacation place or part of some future retirement the lenders DO NOT want to pave the way for you to move out.

The use of cash-out refi for debt consolidation is tricky -- on the one hand if you have a good credit rating but enough debt that it makes sense to use the equity of your home to retire it models USED TO point to this being good for lenders, but now the picture is not so clear. The cycle of gettting into debt and then using one's house as a "magic piggy bank" is recipe to get into a spiral the often ends up VERY badly...

If you want ONLY to refi and NOT take cash out the key things to tell the lender is that you want a LOWER INTEREST rate, not that you want a "lower payment", as they can set the amortization to correspond to 40 year or 30 years or 20 or 15 or 10 and depending on your current rate and time remaining you may be inadvertently signing up for a bad deal. There are plenty of online calculators to help you determine if any discount for a shorter term is adequately set off with a signficantly lower rate.

[westchester]

chet i owe 250 plus 85 home equity...want to take out another 100k for fixing up summer house...i know dont tell bank that i have 11 years left on mortgage 5% house is worth 950k????? home equity or what do you think...thanks

[chet everett]

I think you are in a very good situation if you really have over $600K in equity and only have 11 years left on a 5% mortgage. If your income will support a new 10 year mortgage you might go that route, though an extra $100K is a pretty extreme to ask for in today's cash out refi world. For that matter a $100K for "fixing up" a summer house is a lot of money in absolute terms, but if the property itself is close to NYC and would support such renovations it probably makes sense.
The rate in HELOC would almost certainly be lower that 5% initially but over the ten years or so that you'd need it I would think an estimate of it increasing by about 25% is reasonable, and 50% or more is not out of the question, so a fixes rate might be worth pursuing.

If your FICO is very high (greater than 760) you should be a welcomed customer to most lenders...

[westchester]

chet the summer house is really a rental summer home...i just got my primary home appraised in june to grieve my taxes so the appraisal is new. as far as the summer rental i can not extract any money from their because it is in a CO OP and a lot harder to take money out...as far as the home equity i expect to have the entire $185 paid back in the next 3-5 years...so should i just apply for an increase in my home equity and and if so...i will just tell them it is to update my existing home...credit is about 720...no credit card payments and 4 months 36 month left with a 330 dollar car payment......thanks