Texas Refinance Laws For Cash Back Refi
I just ran into a problem of trying to refinance my primary residence to obtain cash back. I reside in Texas, and the problem is a 1997 law that says cash out refinance cannot exceed 80% of LTV. I was looking to refinance to lower the monthly payments and at the same time close several credit cards and to invest into other properties. But with this law it seems I will hardly have enough money for a closing. I purchased my property 4 months ago approximatelly 40K under market and looking to use some of the money to go further, but this law really bites those plans. Any suggestions on how to proceed are greatly appreciate it. If anyone has any ways to get around this law I would also appreciate it.
Thanks,
Dan :-? :evil:
My guess is this law was made to protect the lenders from being screwed by borrowers. Texas is a debtor heaven state, and I think the law protects the lenders from the homeowners who take out cash out of their house, blow it all, and then go into foreclosure.
Thanks for the insight....but it still doesn't help my situation.
I'm a lender in Texas, and Texas is a crazy state. You can do a straight Rate/Term refi at 100%, but the moment you want a $.01 back you can not exceed 80%.
For example you owe 70k, the house appraises for 100k, your at 70 LTV, but you have closing cost of say 4% now your at 74%, but the lender wants you to have a year of insurance, plus they collect taxes and extra insurance.
Now you started with 30k in equity but because your in Texas and settlement charges you can only take out a couple thousand. And since you did a cash-out they charge you a higher rate.
The only thing you can do is workout with your loan officer to reduce their fees by letting them know that it will be an easy deal and when they request something you get it to them ASAP and do not take up alot of their time. You can also speak with the title company and ask them to reduce their fees. They are goverened by the state on some fees but they do have their fees that they make money on that they could reduce.
SammyMH,
Thanks for the response...so is there a way to get around this somehow...like a mortgage at 80% and Home equity line at 20% or some sort of a loan to cover other 20%????
Thanks,
Dan
Dan,
There isn't a way around it. It is the law. It only applies to your primary residence, so if you have an investment property to pull cash from you'd be ok.
-Chris
[addsig]
Unfortunatelly I wanted to get cash out of my primary residence to invest in other real estate.
I guess I have to figure something else.
Thanks everyone for answering my post.
Dan
I might be moving to texas, and would like to use equity in my future primary to invest with. Would I be better off trying to get the full purchase price financed, since I wouldn't be able to get over 80% later?
That is correct. Unless you identify it as your investment property for whiich you can get a mortgage from some companies up to 120% of its value. But on primary residence the mortgage can be any amount unless you want cash out...and if that is the case, you cannot get cash out if the total loan exceeds 80% of the LTV.