2nd Mortgage Cash Out Up to 90% Loan-to-Value
Looking to cash out on your home without changing the existing interest rate on your mortgage? A closed end second mortgage allows a borrower to obtain funds disbursed in full at closing and is an additional mortgage taking second lien position. The cash out funds can be used for, but
not limited to:
- Paying off debt.
- Home improvements.
- Buying other investments.
- Buyout divorce settlement.
Determining if a traditional or second mortgage is a better route should be the first step along with going through the pre-approval process.
Maximum Cash Out and Loan-to-Value
The maximum cash out amount is $400,000 and the maximum combined loan-to-value is 90%. The minimum loan amount is $75,000. When determining possible borrowing amount:
Calculating loan-to-value = first mortgage loan amount divided by the property value. For example, if there is a $350,000 mortgage already on the property and the property is worth $650,000 – the loan-to-value would 63.63%.
With a 760 credit score or higher, the maximum combined loan-to-value is 90%. 90% minus 63.63% would allow a borrowing amount of 26.37% or $171,405 given an appraised value of $650,000.
Full Appraisal – Some Cases Not Required
When the loan amount is less than or equal to $250,000, an Automated Valuation Model (AVM) is acceptable as long as the value is acceptable. An AVM streamlines the process and is a computer program that estimates a property’s value.
For loan amount greater than $250,000 and for those who choose to do a full appraisal is the better route, a traditional appraisal is acceptable when determining value. Properties must meet conventional
appraisal standards.
