5 types of refinances for home improvement

• Cash-out refinance
• FHA 203(k)
• CHOICERenovation^® and CHOICEReno eXPress^®
• HomeStyle^® Renovation
• EasyPath™ Renovation

After we break down these top five types of refinances for home improvements, we’ll go over how to determine the best fit for your goals.

Cash-out refinance

A cash-out refinance* is not officially a renovation refinance. You can use the cash-out funds from your home equity however you see fit. But, many homeowners choose this type of refinance with the intention of using the cash out of their home equity to finance home improvements.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

FHA 203(k)

From complete structural changes to minor home renovations, FHA 203(k) programs allow you to finance home rehab costs and your mortgage in one convenient loan. Backed by the Federal Housing Administration, FHA 203(k) loans offer Standard and Limited options. The right one for you depends on the scope of your planned home improvements.

FHA 203(k) Standard

• Structural changes allowed 
• $5K minimum, no maximum repair amount
• Landscaping and hardscaping allowed 
• 180-day maximum completion time
• Manufactured homes allowed 
• HUD consultant required

FHA 203(k) Limited

• Minor remodeling allowed
• No minimum, maximum $35K repair amount
• Landscaping and hardscaping not allowed
• 180-day maximum completion time
• Manufactured homes allowed
• HUD consultant not required 

CHOICERenovation^® and CHOICEReno eXPress^®

Freddie Mac’s CHOICERenovation is a mortgage that allows you to include your renovation costs in your home loan balance. CHOICEReno eXPress is essentially the same program, but for smaller-scale upgrades. What makes these two refinance options different from FHA (203)k Standard and Limited loans is that they’re not backed by any government entity. They are Conventional loans. That means different lenders may have different qualifying criteria.

HomeStyle^® Renovation

Fannie Mae’s HomeStyle Renovation is another Conventional refinance option to fund your home upgrades. It functions similarly to a CHOICERenovation loan, but you can combine it with other Fannie Mae products like HomeStyle Energy (designed for home improvements intended to conserve energy, cut utility costs, and increase the home’s resilience against natural disasters) and HomeReady (designed for low-income borrowers).

EasyPath™ Renovation

EasyPath Renovation is a program that allows you to roll your mortgage and renovation costs together, without having to hire a contractor or make big purchases on your credit card. Designed for home updates completed through major retailers like The Home Depot, Lowe’s, and Menards, EasyPath can be used with Conventional renovation mortgages like CHOICERenovation and CHOICEReno eXPress. It’s important to note that EasyPath itself is not a mortgage, it works with your renovation home loan to help you maximize the benefits.

EasyPath highlights

• Loan amount can be based on the projected value of the home after renovations
• Leverage the same interest rate as the home loan instead of your credit card
• Cardinal makes 100% payment to the retail store to purchase and install the project
• Fixed and adjustable rates available

How do I know which refinance for home improvements is right for me?

Like any big financial decision, there are a lot of factors to consider before committing to a renovation refi. Some of those will be unique to you, but here are a few key questions to ask yourself to narrow down your financing options.

What’s the scale of my planned renovations?

As we covered in this blog, different refinance mortgages are designed for different types of home projects. If you’ve got smaller updates in mind (like fresh paint, new floors, or new appliances), a loan like CHOICEReno eXPress is likely a better fit than CHOICERenovation or vice versa. Some loans, like HomeStyle Energy, are created for very specific types of updates. So, if you’ve got specialized renovations in mind, there might just be a niche loan for that.

How much equity do I have in my home?

Your home equity is what your home is worth in the current real estate market, minus the amount owed on your home loan. If your equity is high, a cash-out refinance is a popular way to leverage that equity. Plus, you can use any funds left over after renovations however you see fit.

What’s my credit score?

The importance of your credit score doesn’t diminish after buying your home. When you refinance, it still impacts the rates you can get and which refinance loans you can qualify for. If your credit score is higher, Conventional renovation loans might offer more competitive rates. If you’re still building your credit score, government-backed options like FHA 203(k) could offer you the flexibility you need.

At the end of the day (and this blog), the right mortgage lender should provide all the guidance you need to decide on the best way to fund your home renovations. So, don’t stress too much about having all the answers before you start the process. You’ve got this!

Rates aren’t the only reason to refi. It’s also a great way to fund home upgrades like new flooring, landscaping, and even structural changes.

The post Refinance for Home Improvements: How to Choose Your Best Fit appeared first on Cardinal Financial.

When should I refinance my mortgage? 4 factors to consider

• How much home equity do you have?
• What are your mortgage goals?
• What are the current interest rates?
• How long has it been since you purchased your home?

How much home equity do you have?

One of the biggest advantages of owning a home over renting is the ability to build equity. Home equity is what your home is worth in the current market, less the amount owed on any mortgage. In other words, it’s the percentage of your home that you own. Unlike monthly rent, every payment you make on your mortgage gets you closer to paying it off entirely, all while your home equity keeps accumulating. 

If your home equity is high, you could leverage it for better rates, cash out, or a new loan type when you refinance. So, how much equity is a lot of equity? As in all things mortgage, it depends on your unique financial situation. In general, you’ll want to aim for at least 20% equity in your home before considering a refinance.

What are your mortgage goals?

When most people think of refinancing, the first thing that comes to mind is a rate and term refinance. As the name implies, a rate and term refinance allows you to get a new rate and/or term on your mortgage. You may also be able to refinance to a different loan type that better meets your needs. It’s not the only option out there, though. 

A refinance can also be used to fund home renovations, leverage your home equity for cash, and more. The goal you have in mind can help you determine if it’s the right time to refinance. For example, if your goal is lower rates and rates are higher than usual, it might be better to wait until rates drop. If your goal is to boost equity with renovations, seasonality might be important to factor into your decision as well.

Top 5 reasons to refi

1. Lower your interest rate to get a lower monthly mortgage payment.
2. Get cash out of your home equity to get funds for home reno, remodeling, and more.
3. Consolidate debt* to make fewer loan payments on a monthly basis.
4. Pay the same amount each month to gain financial stability.
5. Pay off your mortgage faster to save on interest and gain complete ownership.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

What are the current interest rates?

Speaking of rates, let’s discuss the elephant in the room. While rates aren’t the only factor to consider when asking, “When should I refinance my mortgage?” they’re undeniably an important one. No matter your mortgage goals, rates will impact your ability to reach them. 

Yes, lower rates are typically more desirable. But unfortunately, when it comes to average market rates, there’s only so much you can control. It’s up to you to decide if it’s worth it to hold off on refinancing until average rates are lower. And there’s always the risk that if you wait for rates to get lower, they may actually go up instead. 

It’s not an easy decision, but remember that your best rates don’t only depend on the market. Factors like your credit score, home equity, and debt-to-income ratio (DTI) can also help you qualify for better rates regardless of the market. So, if your finances are where you want them, it might be the right time for you to refinance even if average rates aren’t ideal.

How long has it been since you purchased your home?

This one might go without saying, but if you’ve just recently closed on your home or a previous refinance, you’ll want to hold off on starting the process again right away. Aside from the fact that each transaction involves additional costs like appraisal fees, criteria like your credit score or home equity are unlikely to have changed enough to qualify you for new terms in a short period of time. Unless there’s a drastic shift in rates that you plan to take advantage of, it’s recommended to wait at least six months before refinancing after you’ve closed on your last purchase or refi. Keep in mind that some loan types or lenders may also require specific waiting periods before you’re allowed to refinance. 

So, when should I refinance my mortgage?

Now that we’ve gone over some home refinance pros and cons, let’s revisit whether or not it’s time to refinance your mortgage. 

It might be time to refi if:

• You’ve built up at least 20% equity
• A refi fits your homeownership goals
• Rates are low(er)
• It’s been at least 6 months since your last purchase or refi

Of course, everyone’s situation is unique. These four factors are a good place to start when asking if you should refinance your mortgage, but you should always consult with your own mortgage professionals and financial advisors to determine if it’s right for you. And if you have any questions, we’re here to help.

If your finances are where you want them, it might be the right time for you to refinance even if average rates aren’t ideal.

The post When Should I Refinance My Mortgage? 4 Factors to Consider appeared first on Cardinal Financial.

Should I refinance my FHA loan?

Refinancing (of any kind) is essentially just paying off one loan by getting another loan. The rule of thumb is that if you can benefit from a refinance, either by getting better loan terms or a lower interest rate, you should consider doing it. There are plenty of great reasons for homeowners to refinance their mortgage, including:

• Lowering their monthly payment
• Paying off their loan sooner
• Switching from an adjustable-rate loan to a fixed-rate loan
• Tapping into home equity to take cash out

If you’re looking to take advantage of a lower interest rate, better loan terms, or get cash out, you should consider a refinance.

What are my FHA refinance options?

If you want to refinance your FHA loan, there are two basic options: Refinance to a different loan type, or refinance to another FHA loan with new terms.

Refinance to a different loan type

You can replace your FHA loan with another one, such as a Conventional loan, which isn’t backed by the government. While it may be harder to qualify for, there are plenty of benefits that come with a Conventional mortgage. For starters, you could avoid mortgage insurance entirely by replacing your FHA loan. As long as you’ve reached 20% equity in your home, you won’t have to pay any mortgage insurance on a Conventional loan.

Pro Tip: Simplify your budgeting and see what rates you can expect with our refinance calculator.

Refinance to another FHA loan

If you decide to stick with an FHA loan, you’ve got a few options for your refinance.

FHA rate-and-term refinance

Most homeowners opt for a rate-and-term refinance to either take advantage of a better rate or switch from an adjustable-rate mortgage to a fixed-rate mortgage. Lenders will require you to go through a credit qualification process and a new appraisal when you apply for the loan. However, it’s possible you could get a better interest rate if you’ve built up equity in your home.

FHA Streamline refinance

Like the name suggests, this loan is more streamlined than a rate-and-term refi because it allows you to refinance with less paperwork and fewer steps. Not only can you lower your interest rate, reduce your monthly payment, or shorten your loan term, you can get it done without having to go through a home appraisal, provide bank statements and your credit report, or verify your income. The lender will just use the information gathered from your initial FHA loan. The Streamline is a better option when your home hasn’t risen much in value, or you’re planning to sell your home soon, because it helps you avoid adding closing costs to your principal balance.

FHA cash-out refinance

If you need cash to make home improvements, consolidate debt, or anything else, the FHA cash-out refinance* is for you. A cash-out refi allows you to take out a loan that’s bigger than your current mortgage, pay off the original loan, and pocket the difference. You can use the cash for whatever you need. You must have at least 20% equity in your home to qualify.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

FHA 203(k) refinance

Planning home renovations? Consider refinancing to an FHA 203(k) loan. This loan is specifically designed to roll your project costs and mortgage into one convenient loan. Why is that a good idea? If you take out a separate loan or pay for renovations with a credit card, you could have to pay more closing costs and higher interest rates. Plus, you’ll take more than one hit to your credit.

More questions to ask to determine if you can refinance your FHA loan.

Is it the right time to refinance my FHA loan?

If you already have an FHA home loan, and you’ve made at least six months of on-time payments, you should be good to go refi. For FHA cash-out refis, you should provide 12 full months of on-time payments.

Are there closing costs?

Like any loan, there are closing costs, but with a Streamline refi, you won’t have to pay for a credit report or appraisal like you might with other loans.

Will I still need to pay mortgage insurance?

If you refinance your FHA loan to another FHA product, you’ll still need to pay mortgage insurance premiums (both upfront at closing and in monthly payments) on your new refi.

What documents will I need to refinance my FHA loan?

For most FHA refinances, you’ll need to provide your credit report, full income and employment verification, and undergo a home appraisal. You should also check with your lender to find out any specific documentation you may need to provide for your refinance.

Can I refinance an FHA loan: Final takeaways.

To answer your initial question, you absolutely can refinance your FHA loan. Whether or not you should, and which type of refinance is right for you, depends on your financial goals, your homeownership plans, and current market conditions. If you’re not sure where to start, our team is here to help.

If you want to refinance your FHA loan, there are two basic options: Refinance to a different loan type, or refinance to another FHA loan with new terms.

The post Can I Refinance an FHA Loan? What You Need to Know appeared first on Cardinal Financial.

What is an FHA Streamline Refinance?

FHA Streamline Refinance is a loan designed by the Federal Housing Administration to help homeowners make their FHA mortgage more affordable without the burden of an extensive qualification process. Easier qualification means an easier, simpler process for you, the homeowner.

Plus, it’s a win-win for the FHA. Since they already insure your mortgage, they presume there’s a lower chance that you’ll default. At the same time, they’re helping you get a better, more affordable loan.

What are the benefits?

The FHA’s streamline refinance program is loaded with benefits for borrowers who qualify. Here’s a quick list to give you an idea:

• Lower your rate and/or payment just like you would with a Conventional home loan refinance.
• Offered as a five-year adjustable-rate mortgage (ARM) or as a fixed-rate loan with a term of 15, 20, 25, or 30 years.
• Lower credit requirements. 
• Limited documentation. That means no income requirements, no proof of employment, no coughing up bank statements, and no asset verification required.
• No home equity? No problem. Unlimited LTV means you’re still eligible even if you have little or no equity in your home.
• No appraisal required.

How does an FHA Streamline work?

Of course, as with any money you borrow, some restrictions apply. For starters, there has to be a demonstrated net tangible benefit in a FHA Streamline Refinance transaction. Net tangible benefit means you can only do an FHA Streamline Refinance if it benefits you. Would a FHA Streamline Refinance lower your interest rate? Would it convert your current mortgage from an ARM to a fixed-rate loan? Put simply, would it leave you in a better position than before? Great! That’s the kind of borrower the FHA is looking to serve with their FHA Streamline Refinance program.

You can’t increase your loan balance to cover refinancing costs and your new loan cannot exceed the initial mortgage amount. When you do a FHA Streamline Refinance, your new loan amount is limited to the current principal balance plus the upfront mortgage insurance premium. That means you’ll either have to pay closing costs out of pocket or get a “no-cost” loan. And really, “no-cost” should actually be called “no out-of-pocket costs” because it means your lender agrees to pay the closing costs if you agree to pay a higher interest rate.

Are there any downsides?

If getting cash out of your home equity is your goal, an FHA Streamline Refi may not be right for you. Why? Because you can’t get more than $500 cash back for minor adjustments in closing costs.

Like your original FHA loan, an FHA Streamline Refinance still requires you to pay mortgage insurance in both a one-time, upfront mortgage insurance premium, which you pay at closing, and a monthly mortgage insurance payment.

How can I qualify?

Your mortgage must be current (not delinquent) when you apply for your FHA Streamline Refinance. You’re only allowed to make one late payment on your current FHA mortgage in the past year. And on top of that, your mortgage payments for the last six months must have been made within 30 days of their due date. Since FHA Streamline Refinances require less verification, this kind of payment history will show your lender and the FHA that you can responsibly pay off your current mortgage.

Finally, you must have made at least six monthly payments on the mortgage being refinanced, and the six most recent payments must have been made on time. In addition, at least six months must have passed since the first payment due. At least 210 days must have passed since the date you closed.

The bottom line

The most important thing to remember about an FHA Streamline Refinance is you can only qualify for this loan if you’re refinancing your current FHA mortgage to a new FHA mortgage. If you’re refinancing to or from a different loan type, this option is not available. The good news is that since you already qualified for an FHA loan when you bought your home, it’s almost guaranteed you’ll qualify for a new FHA loan when you refinance.

The post FHA Streamline Refinance: What It Is and How It Works appeared first on Cardinal Financial.

To help you narrow it down, let’s explore the types of mortgage refinances, as well as some financial alternatives.

5 Types of Mortgage Refinance Options and Alternatives

• Rate and term refinance
• Cash-out refinance
• Home equity line of credit (HELOC)
• Sell your home and downsize
• Turn your home into an investment property

Rate and term refinance

When most people think of refinancing a loan, they think of a rate and term refinance. This is the most traditional route, and for good reason. As the name implies, a rate and term refinance allows you to get a new rate and/or term on your mortgage. You may also be able to refinance to a different loan type that better meets your needs. 

For example, many homeowners start out with an FHA loan because it can be easier to qualify for as a first-time homebuyer. As they build home equity and grow their credit score, they may want to refinance to a Conventional mortgage so that they can drop monthly mortgage insurance premiums.

When is it a good idea?

Rate and term refinances are a great choice if you want to pay off your mortgage faster or take advantage of lower interest rates. 

Cash-out refinance

A cash-out refinance is when a borrower refinances their mortgage for more than the amount they currently owe and receives the difference in cash. They allow you to lock in a new fixed rate for the life of the loan and get predictable payments that make budgeting simple. Plus, all fees associated with the cost to borrow are paid upfront—no surprise fees down the road.

When is it a good idea?

If your goal is flexible funds, consolidating debt*, or financing home upgrades, a cash-out refi could be the right fit for you. Just keep in mind that unlike a rate and term refi, your monthly payment will likely go up, not down.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a refinance option that allows you to borrow against your home equity and use that to pay for miscellaneous expenses. It’s unique in the sense that the cash may be advanced to the borrower via a line of credit—like a credit card—rather than in a lump sum. You may have heard HELOCs more commonly referred to as second mortgages.

When is it a good idea?

Cash-out refis and HELOCS are similar. But, if your goal in tapping into home equity is for more flexible finances in general (rather than for a specific project like renovations) a HELOC might be a better fit.

Sell your home and downsize

Refinancing isn’t the only way to meet your homeownership goals. If your goal is to get cash from your home equity, selling your home might also be a viable option. In fact, you may even get more money back from selling your home than you would from refinancing. A smaller home may come with a smaller monthly mortgage payment, leaving you with more money in your pocket to pay for other expenses.

When is it a good idea?

This option could be right for you if you’re ready to downsize and current rates are more optimal than when you bought your current home. 

Pro Tip: For borrowers age 62 or older, a reverse mortgage is a way to leverage the home equity of your current home to reduce the cost of purchasing a new home.

Turn your home into an investment property

If you’re cash-strapped, flipping your home into an investment property might pay off more than refinancing. You could rent out a room, a floor, or the whole place if you’re away often. This option means you can keep living in your home, continue with your current mortgage terms, and make additional income at the same time. Renting out your home isn’t for everyone, though. And in some cases, using your home as an investment property may not be permitted by your existing mortgage, local government, or homeowners association.

When is it a good idea?

If you don’t mind people in your space, aren’t looking for new mortgage terms, and want to increase your cash flow, renting out your home could be the right choice for you.

Are there any other mortgage refinance options I should consider?

There’s no single right answer when it comes to refinancing or using your home to access more flexible finances. The right choice for you depends not just on your goals, but also on the current market rates. Whether you decide to keep your current terms, refinance, or take a different route with your home loan altogether, don’t rush a decision just because it seems like the next milestone you should reach. At the end of the day, homeownership happens at your own pace.

The right mortgage refinance type for you depends not just on your financial goals, but also on the current market rates.

The post The Best Mortgage Refinance Options and Alternatives appeared first on Cardinal Financial.

10 Tips for Refinancing a Home Loan

• Calculate your savings
• Consider your home equity
• Make a plan to pay off your loan
• Get to know the refinance process
• Get multiple refinance quotes
• Do the math before deciding to buy down your rate
• Factor fees and closing costs into your refinance budget
• Read your closing documents carefully
• Find small ways to cut costs
• Weigh the pros and cons of staying with your current lender or getting a new one

1. Calculate your savings

Will refinancing a home loan actually save you money? A simple budgeting tip for refinancing your home loan is to use a refinance calculator. It factors in your original loan amount, APR, and term; your new loan amount, APR, and term; and various fees associated with the transaction to come up with an estimated new monthly payment and savings. The right calculator can help you shop for the right loan, give you a good idea of what to expect, and calculate how long it might take you to recover from the costs of refinancing. Doing your own research can be beneficial, but keep in mind this is an estimate. You’ll have a better idea of your real payment and costs once you get in touch with a loan originator.

Pro Tip: Many Borrowers tend to think refinancing is all about the rate, but we recommend focusing on your savings (or, for cash-out refinances, the amount of equity you’re tapping into).

2. Consider your home equity

No matter your refinance goals, your home equity is key to reaching them. The more equity you have in your home, the easier it is to refinance. With the exception of a few loan programs, most lenders will verify that you have at least a small amount of equity in order to refinance. That doesn’t mean a lack of equity should keep you from applying though! There are loan programs, like the FHA Streamline refinance, that are built especially for homeowners with little to no equity in their homes. Ask your loan originator about refinancing options for homeowners with low equity if you think you’ll have trouble refinancing.

3. Make a plan to pay off your loan

Once you’ve decided that refinancing is a financially wise decision, it’s time to sit down and figure out how you’ll pay back the loan. Your long-term mortgage plans aren’t just about your rate. Talk with your financial advisor and come up with a plan to pay off the loan that leaves room for your other living expenses. Don’t rely on unpredictable income like tax refunds or employment bonuses to reach your payment goals. You can still use these to make additional payments, just think of them as a “nice to have” in your plan rather than essential.

4. Get to know the refinance process

Refinancing can be a quicker process than a home purchase, especially if you get a streamline refi. However, most of the steps of the process still apply. You’ll want to consult your loan originator before you take out a line of credit, change jobs, transfer large sums of money, or make any other major financial decisions. 

Pro Tip: Watch this video for an overview of the refi process.

5. Get multiple refinance quotes

Don’t be afraid to chat with a few different mortgage lenders and get a loan estimate from everyone you talk to. A loan estimate outlines the offer the lender is willing to make in detail, which allows you to make a clear comparison between offers so you can more easily decide which lender to choose.

6. Do the math before you decide to buy down your rate

These days, the average time an individual owns their home is often shorter than the time it would take them to recuperate the closing costs. If you choose to buy down your rate, there are many tools available online that can help you do the math. And, as always, your loan originator should be able to calculate this for you over the phone, so consider giving them a call.

7. Factor fees and closing costs into your refinance budget

When you’re refinancing a home loan, you have to pay many of the same fees you would with a home purchase. Property taxes, homeowners insurance, and closing costs are just a few of these fees. Make sure you set aside some money to cover these expenses at closing.

8. Read your closing documents carefully

Don’t just sign your closing documents—review them carefully. After all the moving parts of the refinance process have settled, it’s possible that there may be a mistake or two on your closing documents. Mortgage lenders are legally required to give you a closing disclosure before you reach the closing table. Take the opportunity to make sure these documents represent the offer you agreed upon at the beginning of the refinance process. 

9. Find small ways to cut costs

When it comes to lowering your refinance costs, every little bit helps. So, one of the most timeless tips for refinancing a home loan is to look for small ways to cut costs. For example, some lenders allow lower monthly payments when you opt-in to auto-pay instead of paying manually each month. Other potential ways to save could include:

• Timing your refi to the market. When rates are low, take advantage!
• Getting a streamline refi to avoid appraisal fees
• Avoid big purchases before applying to keep your credit score where you want it

10. Weigh the pros and cons of staying with your current lender or getting a new one

Deciding whether to stick with your lender or choose a new one for your refinance is up to you. On one hand, a new lender might be more incentivized to offer you lower rates. On the other hand, sticking with your current lender means they already have all your mortgage history available, which can help you speed up the process. And if you’ve taken out an FHA or VA loan and plan to refinance to the same loan type, your current lender can help you streamline your refi. This typically means less paperwork, no appraisal required, and faster turn times.

If all this sounds like a lot to consider, don’t worry! You made it through purchasing a home, and your refinance is within reach, too. And if you have any questions or concerns, we’re here to help.

The post 10 Tips for Refinancing Your Home Loan appeared first on Cardinal Financial.

So, is it better to get a HELOC or refinance your mortgage? Let’s break it down.

What is a HELOC?

To understand whether it’s better to get a HELOC or refinance your mortgage, it’s important to understand just what a HELOC is.

• A HELOC, or a home equity line of credit, is a loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the equity in your house. Think of it like a credit card that’s connected to your home equity rather than your bank account.
• A HELOC is often referred to as a lien on your home, or a second mortgage, because it’s another loan in addition to your first mortgage.
• HELOCs have their merits and are typically considered a secure form of debt, but you’ll see there can be a number of drawbacks to this type of financing depending on your circumstances.

HELOCs: The Drawbacks

So, if a HELOC is just a loan that lets you use your home equity, what could be the potential drawbacks? Well, for starters:

• Getting a HELOC means adding another monthly payment to what may already be a tight budget.
• HELOCs come with adjustable rates, which means payments will fluctuate—sometimes each month. This can make budgeting more challenging and put you at the mercy of the market market.
• You may have to pay different fees throughout the course of a HELOC, like an annual fee or inactivity fee.
• You’re required to pay interest on the money you withdraw. And although HELOCs offer the option of interest-only payments for a period of time, you risk making payments for longer than you need to.
• The interest you pay on HELOCs is only tax deductible* if it’s used to build on or improve the home that secures the loan.
• HELOC lenders only allow you to withdraw money during a predetermined “draw period.” Also, they typically enforce a minimum draw requirement. That means you have to take out the minimum required amount even if it’s more than what you need at the time.
• Since a HELOC is a loan secured by your home, if you’re unable to make payments on your HELOC, you risk losing your home.

While there may be some benefits to HELOCs, the risks can be high—even for lenders. That’s why HELOC lenders are pulling back on offering this type of financing.

So, with fewer lenders offering HELOCs, how do you get cash to renovate your home in the current market?

*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

HELOC vs. Cash-Out Refinance

Cash-out refinance to the rescue. Here’s what it all boils down to: Why get credit when you can get cash? After all, it’s your hard-earned home equity on the line. That’s why cash-out refis can be a smart solution for homeowners who want to leverage their home equity. Take a look at the benefits.

• With cash-out refinance, you refinance a your mortgage for more than what you currently owe and pocket the difference in cash. It’s one monthly payment—no separate loan!
• A fixed-rate equals predictable payments, making budgeting easier and less stressful.
• All fees for a cash-out refi are collected up front, and interest rates are typically lower than that of HELOCs.
• No draw periods, no minimum draw requirement, and no extra interest-only payments. The only caveat is lenders limit how much cash you can take out to keep you from tapping into 100% of your home equity.

So, is it better to get a HELOC or refinance?

As in all things mortgage, the right choice depends on your goals. Overall, a cash-out refinance tends to be a less risky (and more widely available) way to leverage your equity than a HELOC. Keep in mind that a cash-out refi typically means you’ll have a higher monthly mortgage payment. When it comes to financing home renovations, a cash-out refinance can help you cover those upfront costs like materials and labor all at once. With a HELOC, the limited amount you can draw from your line of credit at a time might not be conducive to paying for home projects.

The bottom line

Figure out your financial goals before you decide if it’s better to get a HELOC or refinance. Luckily, our loan originators are here to help you do just that.

Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Is it better to get a HELOC or refinance? While there may be some benefits to HELOCs, the risks can be high—even for lenders. A cash-out refi tends to be easier to qualify for.

The post Is It Better to Get a HELOC or Refinance Your Mortgage? appeared first on Cardinal Financial.

Consider this: in 2021, the average age of a first-time home buyer was 33. If those people stuck with a 30-year mortgage to term, they’d be 63 by the time the loan was paid off. Sixty-three also happens to be the average age of retirement in the United States.

Of course, many people move before their mortgage is paid off. Others opt to refinance, and both options have their upsides depending on the situation. But what if we told you there were ways to pay down (or pay off) your mortgage well before maturity?

3 Tips To Paying Off Your Mortgage

Tip 1: Make An Extra One-Time Payment Each Year

Setting aside a little extra cash every month and making an annual “lump sum” payment is an easy way to pay down your mortgage earlier than previously scheduled. Instead of getting a latte every morning (or finding another luxury to skip — after all, we all need our coffee), put that money in a designated savings account and let it accrue over the year.

Want to get extra bold with your payment plan? Add whatever bonuses, commission checks, and/or cash gifts you receive to the account. At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

Pro Tip: Contact your lender or review your closing disclosure to find out if there are any prepayment penalties, or if they’ll accept partial payments on top of your standard monthly payment. 

Tip 2: Make Bi-Weekly Payments

Another method to paying off your mortgage early is splitting your monthly payment into bi-weekly payments, also known as making payments every other week. With this approach you’d make 26 payments, each of which would be half as much as a full monthly mortgage bill.

For example, if you had a $2,000 mortgage payment per month and made monthly payments, you’d be paying $24,000 per year. With $1,000 bi-weekly payments, you’d be paying $26,000 per year — or adding a full extra payment per year.

Pro Tip: Not every lender accepts this style of payment. Speak with your lender to find out if partial payments are okay or if full payments are preferred. 

Tip 3: Refinance With A Shorter Term

For homeowners who have been chipping away at their home loan balance for a few years, or for those who are simply looking for a better rate (aren’t we all?), refinancing is always an option. While there can be upfront costs associated with refinancing, if you’re looking for a shorter term, you can look into swapping your 30-year mortgage for a 10- or 15-year mortgage.

The good news? If you’ve followed the tips above — making larger lump sum payments and making bi-weekly payments (or adding a little extra to your monthly payment) — you should see better results when refinancing.

Pro Tip: The caveat here is that even with substantially lower interest rates, your monthly payment will likely still be higher than what you’ve been paying, so budget accordingly. 

Considering The Cons

We love the idea of taking control of one’s finances, and who wouldn’t want to own their home outright? However, there are considerations to be made when thinking about paying off your mortgage early. In the interest (ha) of helping you make the best financial decision for you and your future goals, here are some things to think about before taking action on the tips above:

1. By paying off your loan, you’ll lose out on the ability to deduct the interest you’re paying when it comes time to file taxes.
2. You may be responsible for a prepayment penalty. Those amounts vary, and some lenders may not charge you at all, but it’s something to think about.
3. Closing an account — especially one you’ve had for a few years or longer — will temporarily bring down your credit score.

If these are all things that you think you can live with, then go forth and conquer your home financing. And if you want to refinance once rates drop, we can help with that too!

At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

The post 3 Tips to Help You Pay Off Your Mortgage Early appeared first on Cardinal Financial.

If you’re reading this, you’ve probably been dreaming up similar post-renovation scenes nonstop. A kitchen, bathroom, or complete home makeover might be overtaking your every thought. But how do you achieve those picture-perfect goals? This renovating a house checklist will take you through each essential step.

From goal setting to enjoying your upgraded space, our list has your reno all planned out.

Renovating a House Checklist

1. Rank your reno goals

Have a laundry list of potential home renovations? Yeah. Us too.

It’s fun to dream up extravagant home upgrades. But remember that each one comes at a price. You might not know your budget yet. So, reorder your wishlist from most to least important. This will help you cross upgrades off, starting at the bottom of the list, once you establish your renovation budget.

Tip: Write each renovation idea on a separate sticky note. Move the notes around until you have the most important one at the top and the least important at the bottom (and everything in between). You can add estimated prices via a quick online search for added budget info.

2. Consider home value increases

As you prioritize your reno wishlist, it might be helpful to consider the potential equity you could be adding to your home with each project. We can’t give you exact numbers since every local housing market is different. But, there are some widely accepted “higher value” home upgrades you might invest in:

• Modest kitchen updates – Cabinet refinishing, new backsplash, and upgraded lighting.
• Basic exterior face-lift – Fresh coat of paint, siding replacement, or simple landscaping.
• Upgraded bathroom – A new toilet, fresh tiling, and modern light fixtures.

If you know a good real estate agent, reach out for their expert opinion on renovation projects that might increase your home equity. They’ll know your local market much better than Google does.

What’s home equity? It’s the amount your home is worth, minus what you owe on your mortgage loan.

3. Set a budget

You knew this was coming. You can’t get a kitchen that chefs dream of without forking over some dough. If you’ve saved up for your home upgrades, great! You already know your budget.

If you don’t have the funds lying around, you might consider a cash-out refinance. With a cash-out refi, you’ll replace your existing mortgage loan with a new one and pocket a portion of the home equity you’ve been building. It’s like breaking into the piggy bank you’ve been slowly filling with each mortgage payment.

The great thing about using cash from a refinance for home upgrades is that you’ll be working to rebuild the equity you withdrew. Plus, you get to enjoy your renovated home for years to come. It’s a win-win.

Connect with one of your mortgage experts for a cash-out refinance estimate. There’s no commitment and no charge.

Going the cash-out refinance route? Your cashback amount can serve as your budget.

Now that you know how much you can spend on renovations, it’s time to nix the projects that don’t fall within your predefined budget. And remember to leave some financial padding for when something costs more than expected.

Sorry. But also, you’re welcome.

4. Find inspiration

Budgets are boring, but renovation inspiration is so much fun! Now that you know which projects you’ll invest in, it’s time to browse the internet, magazines, and home design shows. Establish your style so you can guide the final outcomes.

5. Select your team

Seek contractor referrals from friends and family. You can also take to the internet for home renovation professionals with glowing reviews.

Sites like Yelp, Thumbtack, and Angi can be beneficial when finding the right team for your renovation. Consider hiring several contractors who specialize in the different projects on your list. You might not want the plumber to install your kitchen backsplash. Just saying.

Tip: Get 2-3 estimates for each project you’re planning. You’ll be able to compare pricing and see how each contractor approaches communication.

Once you pick your favorites, it’s time to get renovating!

6. Prepare your space

Your home prep to-do list for renovations will depend on which areas you plan to upgrade. But in general, you’ll want to put away valuables so they don’t get damaged or dusty. And don’t forget to think through the fact that you might not have appliances like a fridge or washing machine for several weeks. Consider updating your security system while you’re at it. If you’re going to be out of the house for extended periods of time, solid security makes sense.

7. Make living arrangements

Planning on refinishing the basement or upgrading a space you rarely use? You might be able to kick it at home during your remodel. But, if your kitchen and bathrooms are off-limits for a week or two, you might want to book a hotel or plan to stay with loved ones. Unless you want to camp in the backyard, that is.

8. Expect surprises

Remember when we said you should have a budget buffer for unexpected expenses? Well, budget might not be the only unpredictable aspect of home renovations. Timelines, materials, and the people involved can all throw wrenches into your reno plans.

Can you prepare for the unknown? We’re not philosophers, but just don’t say we didn’t warn you.

9. Enjoy your new space

After all that planning and couch surfing, you’ll finally be able to sit back and enjoy. Your home might even look like one from those gorgeous catalogs you’ve been pouring over. Plus, you probably upgraded your home’s value as you worked through this renovating a house checklist.

More home enjoyment. More home equity. Totally worth it.

You can’t get a kitchen that chefs dream of without forking over some dough. If you don’t have the funds lying around, you might consider a cash-out refinance.

Share your home reno inspiration on Facebook or Twitter. Can’t wait to see what your future space will look like.

The post The Renovating a House Checklist You Absolutely Can’t Skip appeared first on Cardinal Financial.

What kind of refi should I get?

At the very beginning of the refi timeline, you’ll be faced with a fork in the road: rate-and-term or cash-out.

With a rate-and-term refi, you’ll get a new (you guessed it) rate-and-term without advancing any new money. If you’re looking to lower your monthly payment or pay off your mortgage sooner, a rate-and-term could be the right fit for you. After all, a lot could’ve changed since you first bought your home and you may qualify for better terms now than you did before.

Speaking of home equity, a cash-out refi* lets you turn that equity into cash. Keep in mind that because you’re taking cash out, you could end up with a higher monthly payment to cover this. If you’re looking to build even more equity with upgrades like a kitchen remodel or pool, a cash-out refi is a great way to fund those home improvements.

So, if you want a lower monthly payment, a rate-and-term fits the bill. If you want to leverage your home equity for more flexible funds, a cash-out could be the better option for you.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

How do I start the refinance process?

The first thing you’ll do is reach out to your lender (or a few lenders if you want options) for a rate quote. You could have your quote within minutes, but take a few days to consider your options. With your lender chosen and quote in hand, it’s time to apply for your refi.

During the application process (which typically takes a few days to a couple of weeks), you’ll need documentation similar to what you provided for your purchase: recent pay stubs, W-2s, and bank statements to name a few. Once you’ve applied, your lender will put together some options for your new rate, then you’ll lock in your best fit.

In the next few weeks, your lender will verify and review all the information you provided in the application, just to make sure everything is accurate. This is called underwriting, and it’s also the point in the timeline where you’ll need a refinance appraisal.

Why do I need a refinance appraisal?

A refinance appraisal is key to qualifying for the new rate you want, and for determining how much cash you can actually get in a cash-out refinance. Over the life of your mortgage, your home has been building equity, whether that’s from upgrades you’ve made like installing new appliances or external factors like the housing market. An appraisal will tell you just how much value your home has accrued since you bought it.

At this point, your lender will order the appraisal for you, the appraisal company will send someone to assess your home, and you’ll get a professional estimate of its value. Depending on how fast the appraiser gets back to you, the whole process could take a few days to a couple of weeks.

Some refinance types, like a VA Streamline Refi (also known as an IRRRL or Interest Rate Reduction Refinance Loan) or an FHA Streamline Refi, won’t require an appraisal. These refinance loans are available if you’re refinancing from a VA loan to a new VA loan, or from an FHA loan to a new FHA loan. With a streamline refi, you’ll enjoy a faster process and less paperwork.

I got my refinance appraisal. What’s the refi timeline from here?

You’ve got your appraisal, which means you’re almost done. A few days before closing, your lender will send you closing disclosures. You should review these carefully to make sure everything is correct and ready to be finalized. Once you’ve reviewed the documents, your lender will help you set up a time and place for closing. You, your co-borrowers if you have them, and a lawyer or closing agent will need to be there.

On the big day, you’ll sign the final documents and pay any costs that haven’t been rolled into your new mortgage loan. If you’re getting a cash-out refi, you’ll receive the check at or within three business days of closing.

And that’s it! From rate quote to close, the whole process typically takes 30-45 days. The turn time between submitting your application and getting approved could take anywhere from a few hours to a few days, depending on how complex your loan is.

How soon will I need another refi?

While there’s no limit to the number of times you can refinance your home, you should wait at least long enough for something significant in your finances or the housing market to change. That could be any number of things, including reducing your debt-to-income ratio (the percentage of your monthly income spent on debt payments), building your credit score, or completing home upgrades.

So, how soon you’ll need another refi is different for everyone—you might never need to, or you may find yourself refinancing as early as six months down the line. Just remember that you’ll have to pay all the fees and closing costs associated with the process each time.

From rate quote to close, the home loan refi process typically takes 30-45 days. A dependable lender will make sure you’re in the loop for each and every one of those.

The post The Refi Timeline appeared first on Cardinal Financial.

So, what homeownership options await a vet like you? We’ll cover the top four types of VA home loans – soup to nuts. Plus, we’ll dig into how to qualify.

First things first though, what exactly is a VA home loan?

VA home loans – the basics

If you get a VA loan, you’ll probably get it the same way most people do. A mortgage broker or a bank will help you. But, there’s one big thing that makes VA loans special – The US Department of Veteran Affairs guarantee. This guarantee means the government will cover part of the loan if a borrower can’t make their payments anymore (when the loan ends up in foreclosure.)

That promise from the government reduces the risk to the mortgage lender. So, if you qualify for a VA home loan, you get some of the most competitive rates out there. And, you get a simplified application process. You deserve it.

Different types of VA home loans

Looking to buy a home? Or, are you ready to lower your monthly payment? How about investing some of that home equity into a kitchen remodel? The VA has you covered. These 4 mortgage types carry the VA guarantee, so you get the veteran benefits when you use one.

1. VA Purchase Mortgage – This loan is for – you guessed it – buying a house. It gives qualified borrowers those competitive VA interest rates, without a down payment and without private mortgage insurance (PMI).
2. Interest Rate Reduction Refinance Loan (IRRRL) – You might also hear this referred to as VA streamline refinance. If you already have a VA home loan, you can use this refi to lower your interest rate or change your adjustable rate mortgage to a fixed rate mortgage. So many names, so many benefits.
3. VA Cash-Out Refinance – Want to turn some of your home equity into cash? The VA cash-out refi could be just your loan. You’ll get cash and your new VA loan will start over. And, yup. You guessed it. You’ll get all those VA loan perks, too.*
4. Native American Direct Loan (NADL) – Qualifying Native American veterans can use this loan to buy, build, improve, or refinance a home on federal trust land. The best part? Closing costs are low, rates are competitive, and you don’t need a down payment.

VA loan terms to know

• Home equity – The current dollar value of your home, minus the amount owed on your home loan.
• Interest rate – The amount you’ll pay to borrow money from a lender. The cost to borrow is shown as a percentage on top of your home loan amount.
• Adjustable rate mortgage – A mortgage loan with an interest rate that may go up and down over the life of the loan.
• Fixed rate mortgage – A mortgage loan with an interest rate that stays the same for the life of the loan.
• Closing costs – Fees and other charges, on top of your home loan amount. These are usually due on closing day, but can often be rolled into your monthly payment.
• Private mortgage insurance (PMI) – The extra fee for borrowers with less than 20% of the loan value to invest up-front. VA loans don’t require PMI.

What types of homes qualify for VA loans?

I can tell you’re excited about VA loan possibilities – and we are, too. But what types of homes qualify for VA loans?

Qualifying home types

Single family homes – Of course. Individual houses are the main VA loan attraction.

Condos/townhomes – If the condominium complex is VA approved, you’re good to go. But, even if it’s not on the approved list, your lender can request approval from the VA.

Modular homes – If the modular home is attached to the foundation, it should be covered by a VA loan.

Mobile homes – Mobile homes (also called manufactured homes) are eligible for VA loans. Just check with your mortgage professional to see if they lend for mobile homes.

New construction – Yes, you can buy a newly built home with a VA loan, but it can be tricky. The lender will need build plans and the building site must be VA approved. On top of that, three different inspections are required.

The VA says, “nope”

Vacant land – The VA doesn’t guarantee loans on vacant land. Darnit.

Co-ops – Cooperative housing projects aren’t currently covered by the VA. This is because you’re not actually buying real estate, but just a share of the property.

Perk up your home purchase with a VA loan

Ready to benefit from those VA home loan… well… benefits? With competitive interest rates, limited closing costs, and no need for a down payment, your finances could benefit big time. And let’s be honest. You totally deserve it.

Reach out today to see if you qualify for that VA loan and to get a mortgage estimate.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Looking to buy a home? Or, are you ready to lower your monthly payment? How about investing some of that home equity in a kitchen remodel?* The VA and Cardinal Financial have you covered.

What are your homeownership goals? Share your VA loan plans on our Facebook or Twitter. We can’t wait to hear from you.

The post Types of VA Home Loans appeared first on Cardinal Financial.

The short answer: Yes! You can use your VA loan as many times as you want.

The (not too) long answer: We’re about to break it down. It all depends on your entitlement.

What’s my entitlement?

Your entitlement determines the amount of VA mortgage loan you have access to. So it’s actually not about how many times you can use a VA loan, but about how much entitlement you have available.

Specifically, your entitlement is how much money the VA will repay on your behalf if you default on your loan with a private lender. The VA offers a basic entitlement of $36,000 and your private lender will typically offer up to four times that entitlement. That means your VA mortgage likely covers a $144,000 loan.

What if I need more than my basic entitlement?

Say you’ve got your eye on a home that exceeds the $144,000 amount covered by your lender. That’s where bonus entitlement comes in. Bonus entitlement increases the amount you can borrow, freeing you up to find your dream home in more expensive housing markets.

A bonus entitlement can even exceed the conforming loan limit (the legal maximum dollar amount of a standard loan) giving you an edge over other buyers. This is called a jumbo loan. Keep in mind that to qualify for a jumbo loan with a bonus entitlement, you’ll need to pay off your current VA loan in full to restore your entitlement.

You’ve probably already used some (or all) of your entitlement on your current home loan, but there are a few ways you can restore it and increase your borrowing eligibility. This allows you to keep taking out VA loans as many times as you need to, forever.*

*When you reuse your entitlement, your VA funding fee may increase. Your funding fee varies based on your military status, down payment, and the number of times you’ve used your entitlement.

Sounds good! How do I restore my entitlement?

There are three key ways to restore your entitlement:

1. Sell your home and use that money to pay the loan in full, closing the mortgage.
   Pro tip: Don’t forget to apply for entitlement restoration after you’ve completed payment.
2. Get another veteran to take over your current home loan. When they purchase your home and assume the mortgage, the entitlement tied to the loan will transfer to the new owner and free yours up for your new home.
   Pro tip: If a non-veteran buys your home and assumes the mortgage (instead of taking out their own), your entitlement will still be tied to the loan. In other words, it won’t work.
3. Pay your current loan in full. If you’re planning to retain your home but still want to restore your entitlement, this approach fits the bill.
   Pro tip: You can only use this option once.

To officially restore your entitlement after using one of these methods, you’ll need to submit VA Form 26-1880. This is the same form you used to get your initial COE (Certificate of Eligibility) when you applied for your first VA loan.

How many VA loans can I have at once?

Your entitlement never expires, so as long as your full entitlement amount isn’t already being used for an existing loan, you can use it as many times as you want—even for two loans at once.

Your VA loan has to be used for your primary residence, but good news! The VA understands that military personnel may have to relocate frequently, so they offer a bit of flexibility.

Say you’re relocating for a new duty station but don’t want to sell your current home. You can use your remaining entitlement to take out a loan for your new home while keeping the mortgage for your former residence.

While you’re relocated, you can rent out your former residence as needed. As with any VA loan, you can’t use your entitlement to buy a second property solely as an investment or vacation home.

So, with all that in mind, how many times can you use a VA loan?

We’re almost done! To recap:

• You can refinance a VA loan as many times as you need to.
• Entitlement is the portion of your home loan backed by the VA.
• There are three key ways you can restore your entitlement.
• Your entitlement never expires.
• If you have enough entitlement available, you can take out two VA loans at once.
• If you take out a second VA loan, it can’t be used as an investment property or vacation home.

When you’re ready to get started, reach out to our team and find out how your VA loan can serve you — again and again.

Your entitlement never expires, so you can use it as many times as you want—even for two VA loans at once.

Have questions or VA loan experiences to share? Give us a shout on Facebook or Twitter!

The post How Many Times Can You Use a VA Loan? appeared first on Cardinal Financial.