How long does it take to get a cash refinance

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Cash-out refinances have become increasingly popular over the past year and a half. But maybe they’ve gotten a little too popular.

From the first to the second quarter of 2021, cash refinances, or “refis”, fell from 37% to 49% of all refinance loans, according to the real estate data analysis company. Black Knight. “With mortgage rates at record highs, there has been an increase in refinances and home purchases,” said Jeff Arevalo, financial advisor at Greenpath Financial Wellness, a national not-for-profit credit counseling agency. The average time to refinance a home used to be 35 to 45 days. But now, refinances last 45 to 60 days, Arevalo says.

If you are in the market for a cash refinance, you may want to allow a longer period before you see any funds. Here’s how withdrawal loans work, how long you can wait to receive the money, and how you can speed up the process.

What is refinancing with withdrawal

A refinance with withdrawal is a type of refinance loan that allows you to withdraw some of the equity in your home in the form of cash.

With traditional refinancing, you replace your current mortgage with a new loan, often to get a lower interest rate or a more affordable monthly payment. But in the case of cash-out refinancing, you take out a new loan that is larger than your current mortgage balance. Part of the loan is used to pay off your current mortgage, while the rest is returned to you in cash.

People use cash refinances for a variety of purposes including paying off high interest debt, covering a child’s school fees, paying for home renovations, and more. Low interest rates and rising home values ​​have made these loans particularly attractive over the past year.

Since mortgages generally have lower interest rates than other types of financing, people have been able to borrow against their home equity at a cheaper rate than other means of borrowing such as loans. personal or credit cards.

Simultaneously, Zillow data shows that the average home price has increased by more than 18% over the past year. As a result, people have more equity to borrow than they would have a few years ago.

As with any mortgage loan, lenders will consider factors such as your credit rating, debt-to-income ratio, and the amount of equity in your home. Lenders typically allow you to borrow up to a certain percentage of your home’s value, called a loan-to-value ratio (LTV).

How long does it take to get funds from a withdrawal refinance?

When you do a withdrawal refinance, don’t expect to take a check home with you the same day. According to Melissa Cohn, Executive Mortgage Banker and Regional Vice President at William Raveis Mortgage, you will have to wait a few days after closing to receive the money.

“If this is a primary residence, there is a three business day termination period after closing to receive the funds,” Cohn said. “If it is a second home or an investment property, the funds are available the same day. “

This three-day period is a legal right that borrowers have called the right of withdrawal. When you close your refinance loan, you have three business days to change of opinion and terminate the contract. Once this cancellation period has passed, your lender will issue the check for the cash portion of your refinance loan.

In some cases, it may be possible to waive your right of withdrawal and receive the money sooner. But for this to happen, there usually must be a personal financial emergency, and you must provide a written statement to the lender explaining the urgency and clearly waiving the right to cancel.

Keep in mind that if you give up your right to cancel, you cannot change your mind about refinancing the withdrawal within three normal business days.

Pro tip

You can speed up the refinance withdrawal approval time by providing your lender with the required documentation in a timely manner. But keep in mind that the current real estate market and other factors beyond your control can slow the process down.

How long does a refinance with withdrawal take?

The process of obtaining a cash refinance – or any other type of refinance – is similar to that of applying for a traditional mortgage loan. Once you have chosen a lender, you will need to apply and get pre-approved. Then the lender will require an appraisal, compile the necessary documents and finalize the loan documents.

A withdrawal closing schedule is similar to any mortgage schedule. “Factors that could affect the timing include: market conditions, the level of lender support, the complexity of your financial situation and the documentation required,” Arevalo explains. Since withdrawal refinances have become increasingly popular, the capacity of lenders has been affected. “Borrowers should allow 45 to 60 days or more to refinance,” he says.

What affects approval time

The factors that affect the approval time of a withdrawal refinance are largely the same factors that affect any other closing schedule. Here are some of the common reasons:

The current housing market

The current real estate market can affect the timeline. In a busy market, when banks are lending more than the average number of mortgages, it may take longer for them to finalize the loan documents.

As a borrower, you can help speed up this process by being proactive in providing the necessary documents. Your lender will need documents regarding your income and financial situation. “If the borrower responds to the lender’s requests quickly, it could help speed up the process,” Arevalo explains.

Evaluation

Another factor that can extend the approval time is appraisal. In a busy real estate market, you may have to wait several weeks for an appraisal, which pushes the entire schedule back. And if you run into an issue where the rating drops lower than you expect, you may need to go back to the drawing board.

Have reasonable expectations about the outcome of the appraisal and the value of your home, Cohn said. “Refinancing appraisals are often disappointing because appraisers are solely responsible for comparables and are not assisted by a real estate broker. “

Type of loan

The approval time for a refinance withdrawal can also be affected by the type of loan you borrow. “Government guaranteed loans, such as VA and FHA loans, take longer to close than conventional loans, often due to stricter underwriting standards and the documentation required,” Arevalo explains.

Final result

Cash refinances can be a useful option to use the equity in your home for more immediate needs, including paying down debt, covering a home improvement project, or spending on education. Expect your withdrawal refi to take around 45-60, and plan to wait three days after close before you see any money. Budget accordingly, making sure to give yourself a time cushion before you need the funds. It is recommended that you research the best mortgage lender and get several quotes to compare.


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