Recently Closed - Cash Out Refinance in Downingtown, PA
Have you heard the latest news on consumer debt? Well, the gist is that it's high. Really high. Like, higher than it's been since before the 'Great Recession'. While mortgage debt and student loan debt are leading the way due primarily to the large loan balances usually associated with these types of debt, another class of debt has achieved all time highs, too. 'Revolving' debt, or it's more common name, credit card debt.
Recently, a past client and friend reached out with some bad news - due to some medical problems in his family, kids in school, and a change in work situation, bills had stacked up and gotten out of control. The good news (GREAT news actually, I can't stress how important this next part is!!!) is that he reached out BEFORE things got to the point of missed or delinquent payments and the 'point of no return'.
We talked about his credit and equity position, and although his credit wasn't stellar due to high balances compared to available credit limits, he had acceptable scores and a fair amount of home equity. We determined an FHA cash out refinance would help save him a couple hundred dollars each month, and we could time it to eliminate out of pocket mortgage costs for 60 days on top of his cash out. As luck would have it, he also had a nice chunk of change in his escrow account, so as a nice bonus, instead of him making a mortgage payment within 30 days of closing, instead his old lender would be sending him his tax/insurance reserve fund.
This transaction allowed us to address some immediate concerns:
- Monthly debt too high to pay down with a lack of household cash flow (aka never ending interest-accrual)
- A recent dip into savings left the client short on reserves/emergency funds.
When it comes to refinancing, we take a 'mortgage planning' approach in which we look at the borrower's short and long term financial goals, and find a product that best helps them pursue their goals. In this case we addressed immediate and future needs by:
- Providing an immediate loan product that would increase cash flow, move high and variable rate credit card debt into a lower fixed rate product, and allow the borrower to replenish reserves.
- Set the borrower up for future savings by offering a loan that would boost credit scores and leave adequate equity so that if rates remain somewhat close to current levels, a transition to a conventional loan from FHA will allow a reduction or elimination of monthly PMI in just a few short months.
Some loan professionals believe that purchase loans allow for a much more personal and meaningful transaction for a borrower, but for refinance transactions that are life changing and leave families in a better financial position, I'd argue that refinances are just as fulfilling. In this case, it was a smart move for our client, and will lead to a brighter financial tomorrow. Here's what he had to say:
"John always comes through with his work. Respectful, Extremely knowledgeable and is always there to answer any questions or concerns. John makes everything easy from start to finish. I recommend John to anyone I know and will never go to anyone else for assistance." - Stephen S. Downingtown, PA
Curious to see if a refinance would help you, your family, or someone you know save money or improve their financial position? We have plenty of options, and the JM Loans team takes a holistic approach as opposed to the traditional sales model - if a refinance WON'T benefit you, we'll let you know that, too. Use our refinance advisor tool to see what options you may have!