Should I do a cash-out refinance for home remodeling?

(Last Updated On: June 15, 2017)

Many times when considering a home remodel or home renovation the option of a home equity line of credit or cash-out refinances come up as possible solutions.   While there are many options to pay for your home remodel a cash-out refinance is probably not the right solution.

First, Let us cover what a cash-out refinance is.  A cash-out refinance is when your house is worth more than you owe and then you refinance your existing loan, or if you own free and clear, obtain a new loan that is more than the current mortgage, less than the value up to the maximum amount allowed by law.

Cash-out Refinances Maximums for Fixed Rate Mortgages

Property TypeNumber of UnitsLoan TypeMaximum Loan to Value
*Some States have lower maximums. loan.  Contact us for the specifics in your state
Principal Residence
1 UnitConventional80%
2-4 Units75%
1 UnitFHA97%*
1 UnitVA100%*
Second Homes1 UnitConventional75%
1 UnitFHANot Permitted
1 UnitVANot Permitted
Investment Property1 UnitConventional75%
2-4 Units70%
1 UnitFHANot Permitted
1 UnitVANot Permitted

However, when doing a home renovation or remodel loan you will have more funds available to get your project done.

Home Renovation and Remodel Loans Loan Maximums

Property TypeNumber of UnitsLoan TypeMaximum Loan to Value
*Some States have lower maximums. loan.  Contact us for the specifics in your state
Principal Residence
1 UnitHomeStyle Conventional Remodel95%
2 units85%
3-4 Units75%
1 UnitFHA 203K Remodel

110%
2-4 Units110%
2nd Homes1 UnitHomeStyle Conventional Remodel90%
1-4 UnitsFHA 203K RemodelNot Permitted
Investment Properties1 UnitHomeStyle Conventional Remodel75% to 85%
2-4 UnitsNot Permitted
1-4 UnitsFHA 203K RemodelNot Permitted
Not all loans available in all states. Renovation and remodel loans are available in  these states . Contact us for further details.

 

Another key factor is that with renovation loans you can do a normal refinance if rates drop in the future.  In some states like Texas if you do a cash-out refinance you are permanently limited to doing only cash-out refinances until you sell the property.  You permanently close the door on being able to do a remodel or renovation loan.  Contact us regarding the specifics in your state regarding cash-out refinances.

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