Cash in Refinance.  Nothin' New.  Nothin' Revolutionary. 

By Gene Mundt, Professional Mortgage Banker  -  Chicago Bancorp

Gene Mundt Chicago Bancorp Bag of Cash pic - Cash In Refinance

     

     The concept of bringing "Cash In" to Closings of a Refinance is nothing new or revolutionary ... but it HAS become more common these days.            

     Why?       

     Home Values have declined in most U.S. housing market regions.  Yields on stocks, bonds, and other investments are dwindling ... and Mortgage Rates are hovering at, or under 5%.  (This last statement should be making those Americans looking to Buy a Home or Refinance salivate).       

     If any of the aforementioned scenarios apply to you as a Homeowner, you might presently be pondering "Cashing In" those investments that are yielding you a miserable rate of return and then utilizing those dollars to "Buy Down" your Mortgage Interest Rate, 1% or more.       

     This is a plan of action you might want to consider, especially if "Buying Down" the Interest Rate is the deciding factor in making a Refinance of your Mortgage possible.         

      A "Buy Down" can prove beneficial to a homeowner in the following ways:  

  • By reducing the Mortgage Balance to qualify at a certain LTV (Loan-to-Value )
  • To qualify for your Mortgage at a lower DTI (Debt-to-Income Ratio) 
  • To eliminate costly Mortgage Insurance, while also lowering the Interest Rate 
  • To reduce the Principal Balance of your Mortgage in conjunction with reducing the Loan Term (thusly keeping the new monthly Mortgage Payment comparable to the previous mortgage payment, but greatly reducing long-term interest costs) 
  • To fit into certain LTV (Loan-to-Value) "windows" on first and second (Combined LTV) Mortgage scenarios.

      There is no across-the-board right answer to these above-mentioned scenarios.  As I've written many times previously in my posts, today's Mortgage Processing and Mortgage Loan is more personalized than ever before.       

      As each borrower's set of financial situations are different ... each situation must be judged on its own merit.  Each decision must be based on the financial scenario and standing of the individual homeowner in question.    

     My suggestion or recommendation would be for the homeowner to consult their Income Tax Advisor and their trusted Mortgage Professional both, prior to proceeding with this type of Refinance.        

     Why?  

Gene Mundt Chicago Bancorp Mortgage Appt. pic

     My fear for any Homeowner with capital to invest is this ... How liquid is their money paid into reducing their mortgage?  How liquid is it versus having the money in a Money Market Account?  Versus a Certificate of Deposit?  Versus a Bond Fund, or etc.?       

     For LONG TERM FINANCIAL PLANNING, I personally would bet on the Mortgage Reduction course of action being the favorable one in most cases.  But each homeowner must consider their own level of comfort when making this decision.  As with any financial decision, their is an element of risk ... and homeowners should be made aware of that fact and discuss their options with their financial professionals before making a final decision.       

     All of the above is great "food for thought" ... and at decision time, ultimately  the Homeowner themself may have the only "right" answer regarding how to proceed.           

Gene

 

 

    * If YOU are seeking information and answers as to whether a Refinance might be possible for your financial scenario and property, please contact me.             

     Together we will analyze your current Mortgage and Financial situation ... and then move forward with a course of action that will benefit your personal and financial needs best.  I look forward to speaking with you soon!    

     Gene Mundt:   Direct: 815.277.4036   Cell: 708.921.6331   Email: gene@chicagobancorp.com www.genemundt.com      

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Gene Mundt, Sr. Vice President - Chicago Bancorp mortgage lender     

Gene Mundt

Regional Manager - Mortgage Lender

                                                                    Personal NMLS #216987

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This post has been included in Illinois Real Estate News Du Page County, IL Real Estate News Naperville, IL Real Estate News
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14 Comments on Cash-In Refinance. Nothin' New. Nothin' Revolutionary.

SEP
29
2010
100,994 Points 2 Featured Posts

I read about this several weeks ago, considering that there are people who pulled their 401k money out of the stock market when things started going bad and that money has just been sittiing in banks earning a pittance.  I think this should be seriously looked into by those who can benefit and not risk everything.  the article I read (can't remember where probably Inman News) had figures showing how much could be "earned" versus normal investments.  It was interesting. 
7:50pm • #1
497,055 Points 150 Featured Posts Outside Blog Hit Router Called Shot Master

Kathy:  It's good to hear that agents are paying attention to articles such as these.  It helps their clients ... and could be beneficial to them personally as well.  You have a good eye!  But your account of this article is exactly why I wrote my post.  A comparison by a Financial Planner and Mortgage Professional is easy to acquire.  Taking the time to do so could save big dollars ... or at minimum, help you sleep better at night after finding out you're already on the best financial path and doing what is best for you.

Thanks for your input, Kathy.  Nice to hear from you ...

Gene
8:31pm • #2
761,240 Points 69 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Another well written article for me to reblog.  I emailed you separately.  Where is the "suggest" button?
8:53pm • #3
497,055 Points 150 Featured Posts Outside Blog Hit Router Called Shot Master

Uhhhhh ... I just now noticed that ... after you hit me across the head, of course.  Not sure ... Will check into it Jane.  Thanks!

Gene 
8:57pm • #4
497,055 Points 150 Featured Posts Outside Blog Hit Router Called Shot Master

Jane: Lordy ... duh.  I just noticed I'm on the Feature Page ... so I guess the Suggest button disappears after that.  Someone beat you to it ... anonymously Jane.  Thanks for the mention of the button ... or I wouldn't have known!  Shhh tho .. don't let that get around.  Like I said .. duh!

Gene
9:01pm • #5
315,007 Points 2 Featured Posts Attended Rain Camp Called Shot Master

I have a refi closing on Friday where the borrower is bringing $40K to closing.  She knew her value had declined, but she doesn't plan on moving.
9:17pm • #6
556,363 Points 11 Featured Posts Outside Blog

Hi Gene -- This post is timely, as I am going through my own refi right now.  For a cash outlay of 2K, I'm switching from a 30 year fixed to a 20 year fixed, my payment will be the same cause of the lower rate, and I'll save 160K in interest over the life of the loan, and I plan on staying in my home until a cow flies over my house.  So...a 2K investment to save 160K and have my loan payed off 4 years earlier than my current loan, seems like a no brainer for me.
9:22pm • #7
644,281 Points 111 Featured Posts Outside Blog Called Shot Master

Thank you Gene for your elementary explanation of the oft misunderstood and complex concept.  Chris (#7) is a classic example of how cash-in refinancing can save a ton of money.  Although he only needed $2k, larger sums could still mean a good idea.  I'm guessing this post is going to open a lot of eyes.

Thanks:-}. I appreciate the time you took to write it.
9:36pm • #8
662,029 Points 17 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Oh, Gene!  I love it!  Thanks so much for the contribution!!!!   My eyes were opened!
9:55pm • #9
368,026 Points 6 Featured Posts

Gene: Thank you. That's great advice. I've had a few of these recently; usually a change in rate and term. Thanks for the post. You're the man!
10:54pm • #10
SEP
30
2010
128,851 Points

I just put about 30K into my loan to buy it down so I could get out of a 10/1arm to a 30year fix. Rates are so low on jumbos right now, it was a no brainer to buy it down.
1:05am • #11
268,695 Points 4 Featured Posts

You are right, Gene - this is VERY GOOD food for thought, once again thoughtfully presented and "user friendly".
2:20am • #12
874,487 Points 154 Featured Posts Localism Sponsor Outside Blog Hit Router Attended Rain Camp Called Shot Master

Excellent information, with rates so low it can be helpful to many homeowners. Too bad Realtors like me, who did Stated Income Loans can't do them.

No I didn't lie, would never do that, but I know many who did.

 
9:08am • #13
497,055 Points 150 Featured Posts Outside Blog Hit Router Called Shot Master

Rodney:  $40,000 might sound like alot .. but your client is a prime example of the very individualized components that go into making a final decision regarding these loans.  Given her financial situation and how long she hopes to stay in this home ... $40,000 could still be a bargain.  Exactly why getting the facts and working with a professional is so very important in making these decisions too.  Thanks for offering up your info ..

Chris:  Sounds like a very good option for you .. and glad to hear it!  Perhaps the biggest challenges involved in this option is getting the homeowner to inquire about the Refi in the first place ... and having the cash to come in with.  Your scenario proves it can be worthwhile to make the effort.  Good to hear from you again, Chris!

Charita:  Better late than never, huh??  I hope this post serves a purpose ... and that's to get people to pick up the phone and inquire about their own individual situations.  You never know until you ask ...    Thanks again for bringing the topic to my attention and the forefront of discussion.

 Dagny:  I'm glad you approved my sending the post to you and your clients.  If I can answer any questions or help in any other way ... just yell!

Hey Paul!  Great to see you!  And yes, these are cropping up with the rates being so low right now.  Glad that it has worked-out for some of your clients for their benefit.  For others in your area ... I'm hoping they read this and are moved to get in contact with you.  Hope biz is good!

Andrew:  You offer another great example of how this type of financing can work to enhance your overall financial scenario.  Very glad to hear that you took advantage of it personally ... and now can provide testimony as to the effectiveness of Cash-Ins.  Spread the news, Andrew!  Thx for writing ...

Karen:  User-friendly ... is that a nice way of saying I do simple well??  lol   Thanks ... as I know it was a compliment!  I try to remember that we're not all in the business and don't all understand the "lingo".  Hope all is going well with you and your new position. 

Missy:  Yep ... the killer stated-incomes ... lol.  Reminds you that there  is good and bad to everything.  And lying ... never ever good ... you're so right about that.  Hope this post serves to help those that CAN be assisted and helped ... and at minimum, lots of inquiries are made.

Gene  
10:17am • #14


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