• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sonoma County Mortgages

Contact Us About Mortgage Financing

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now

Search Sonoma County Mortgages

  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • About SCM
  • About Scott Sheldon

Primary Sidebar

Sonoma County Mortgages is a part of New American Funding

New American Funding - NMLS #6606

Get Your Latest Rate Quote Now!

The best way to cash out refinance your home

April 17, 2022 by Scott Sheldon

Share on Facebook Share on Twitter Share on Pinterest Share on LinkedIn Share on Email
How 2-1 and 3-2-1 Buydown works when buying a home

Consumers are no strangers to the present economic times we are living in right now as everything is rising, and inflation is rampant virtually everywhere. Gas prices, stock prices, housing prices, mortgage rates the list goes on. As cost rises the need to borrow money also increases.  

If you have been thinking about doing a cash-out refinance to combine consumer debt, do home improvement, buy another property, or need cash for any reason; here are ways to go about safely obtaining and accessing your home’s equity.

  1. Cash out refinance on your first mortgage. This might mean having to give up your 2.75%-3% 30-year fixed rate mortgage. You pay off those consumer debts and recognize that to access the cash touching your first mortgage is a possibility. It means having to take today’s prevailing 30-year fixed rate mortgage which is in the mid 4% at present. The advantages are the payment is fixed, deductible, and scalable for the future.
  2. A home equity line of credit is like a credit card tied to your house which also has a high rate. We are in an inflationary environment right now and this situation may last throughout the rest of 2022. As a result, the federal reserve is hiking the fed funds rate plus a margin of 3% prime rate. The prime rate usually has a margin. It is prime plus a margin with your home equity line of credit. Meaning it is realistic to expect your home equity line of credit that you presently have or a new one is going to have a future rate and later future payment increases. Payment increases on a home equity line of credit with a balance are realistic. The advantage of a home equity line of credit is that it’s very low cost to get, and you only borrow on what you pay. Meaning you only borrow on what the balance of the home equivalent of credit is so there’s no balance. Works the same way as a credit card. However, the costs and margins which are the bank’s profit motive are going to likely increase as costs are rising. It would not be uncommon to think the home equity line of credit interest rates could be as high as 6%-7% in the next few months.
  3. A fixed-rate second mortgage which is a hybrid between a fixed-rate mortgage and a home equity line of credit. Still not deductible like the home equity line of credit. However, it is a fixed payment over a 30-year loan or a 10-year loan. The only advantage of this type of product is that it is a fixed-rate payment. However, because it is in the second position on your home much like the home equity line of credit it also is going to have a higher interest rate more than likely somewhere around 6.5%-7.5%.

With all three of these options which one makes the most financial sense for you? A line of credit could be a good decision but if you need to borrow a chunk of money on your home equity line of credit to pay off debt or to do a home improvement project, a clever idea would be to pay off that home equity line of credit. However, most diligent families today do not have that spending ability. To go into a fixed rate mortgage on a new first mortgage even though the rate might be higher could supply immediate fixed-rate payment relief to conduct the goal. Whether that’s fixing up the house or paying off debt. It might not be a bad idea to consider doing a first mortgage instead of a home equity line of credit because it is also tax deductible and as we mentioned, it is also scalable. It would be quite easy for you to refinance that loan and do what is called a “rate and term refinance” which will get you a better interest rate and better terms than a cash-out and take advantage of rates again down the line. A good mortgage lender can clearly and accurately articulate the pros and cons of each of the three products above. It would be a good first step in deciding what might aid you in your decision-making process for tapping your home equity for whatever your financial goals are.

Looking to buy or refinance a house? Start with a no-cost loan quote today!

Related Mortgage Advice from Scott Sheldon

  • Did Your Adjustable Rate Mortgage Reset? Directions to Mortgage Payment Clarity

    In the last several years, many homeowners looking to take advantage of a lower monthly…

  • 2017 mortgage rate environment
    The 2017 Mortgage Rate Environment

    The mortgage industry has gone through some changes in the last three months. If you…

  • how to make your mortgage fit the box
    Make your credit fit the mortgage box

    If you have some credit challenges preventing you from getting mortgage with competitive rates and…

  • Should I get a mortgage rate quote for a refinance from my current lender?

    Many Big mortgage lenders who service loans and originate loans such as Citibank, Wells Fargo…

Filed Under: Uncategorized Tagged With: BAD CREDIT MORTGAGE, banks and credit unions, buying a house, buying your first home, cash out refinance, Consumer debt, conventional loans, Home equity line, sonoma county refinancing

Get Sonoma County Mortgages News and Updates in Your Inbox

Footer

SCM on Facebook

SonomaCountyMortgages.com

Connect on Facebook

SCM On Instagram

Follow Sonoma County Mortgages on Instagram

Follow on Instagram

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

See Reviews on Zillow

Location & Contact

Sonoma County Mortgages and New American Funding are an Equal Opportunity Housing Lender

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
2455 Bennett Valley Road C107
Santa Rosa, CA 95405
1-707-217-4000
View SCM Map | Email Us!

Map of Sonoma County Mortgages New American Financing Office

View Map on Google

Copyright 2010–2023 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing (Opens in New Window) | Privacy (Opens in New Window)
Terms of Use (Opens in New Window) | Electronic Consent Agreement (Opens in New Window)
Opens in new window Opens an external site Opens an external site in a new window