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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
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How much home equity do I need to refinance my mortgage
is the cash value in your home. For instance, if your home is valued at $300,000 and you owe $200,000, your home would have $100,000 of cash value, or equity. If you don’t have enough home equity, , may be required. This is a type of insurance borrowers pay to protect the lender in the event the borrower defaults on the loan. Conventional refinance
For refinances, you’ll need at least 20 percent equity in your home to avoid PMI. This also means you need a loan-to-value (LTV) ratio of no more than 80 percent. You can use Bankrate’s to find out your ratio. FHA and VA refinances
For cash-out refinances, mortgage lenders prefer borrowers have 20 percent equity remaining after the refi. Through a , you can access up to 100 percent of your equity.
Refinances for low- to no-equity mortgages
For those who are (in other words, you owe more than the home is worth) or have little to no equity, there were two programs, the and the from Fannie Mae, designed to help. Both of those programs have been temporarily suspended. An alternative for homeowners who may be underwater on their mortgage is paying down the amount owed with a , says Joseph Polakovic, owner of Castle West Financial. “A homeowner could take out a personal loan and pay into their home to a point where they have enough equity to conduct the refinance,” explains Polakovic. After paying down the mortgage and conducting the refinance, the homeowner might consider applying for a home equity line of credit (HELOC) on the home and using the funds to help pay off the personal loan, suggests Polakovic. “Ultimately, this would lower their effective borrowing interest rate, as they would have brought down the interest rate and loan amount on their home from the refinance,” says Polakovic. Bear in mind that economic uncertainty can make it difficult to get a personal loan unless you have good credit, and some lenders have temporarily. Overall, this option requires understanding exactly how much new debt (in the form of the personal loan) you can take on while still falling below the maximum debt-to-income allowed for a refinance. If you’re unsure about any of this, consult a financial advisor before proceeding. SHARE: Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Kenneth Chavis IV is a senior wealth manager who provides comprehensive financial planning, investment management and tax planning services to business owners, equity compensated executives, engineers, medical doctors and entertainers. Related Articles