How does a Cash Out Refinance with ACM Work?

Why Texas' Homeowners Trust Us for Cash-Out Refinancing?

• Transparent Refinance Costs: Know exactly what you’re paying—no hidden fees, just straightforward savings.

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What is cash-out refinancing?

Cash-out refinancing is a type of mortgage where you refinance your existing home loan for more than you owe and take the difference in cash.



This allows you to tap into the equity built up in your home to access funds for various purposes.

How does cash-out refinancing differ from a traditional refinance?

Traditional refinancing replaces your existing mortgage with a new one, typically at a lower interest rate, without accessing additional funds.



Cash-out refinancing, on the other hand, involves borrowing more than your current mortgage balance and receiving the extra amount as cash.

Does Texas allow cash-out refinancing?

Yes, Texas permits cash-out refinancing, but the process is governed by more stringent regulations than in many other states.

These rules are designed to protect homeowners and ensure they do not overextend themselves financially.

Who is eligible for a cash-out refinance in Texas?

 To be eligible, you generally need:

• A minimum credit score of 620.
  
  
• A maximum debt-to-income (DTI) ratio of 43%.
  
  
• At least 20% equity in your home.
  
  
• Proof of consistent income and employment.

What are the specific regulations for cash-out refinancing in Texas?

Key regulations include:

• The loan-to-value (LTV) ratio must not exceed 80%, meaning you can only borrow up to 80% of your home's appraised value.
  
  
• Closing costs are capped at 2% of the loan amount.
  
  
• You must have at least 20% equity in your home to qualify.
  
  
• All existing second liens or mortgages must be paid off with the cash-out refinance.
  
  
• The property must be your primary residence; cash-out refinancing is not allowed on investment properties or second homes.
  
  
• A six-month seasoning period is required, meaning your current mortgage must be at least six months old.
  
  
• Only one cash-out refinance is allowed per year.

Can I refinance my FHA or VA loan with a cash-out refinance in Texas?

No, FHA and VA loans are generally not eligible for cash-out refinancing under Texas law. However, FHA and VA borrowers may have other refinancing options available.

What can I use the cash from a cash-out refinance for?

The cash can be used for a variety of purposes, including home improvements, debt consolidation, paying for college tuition, or covering significant life expenses.

There are no restrictions on how you use the funds.

How much cash can I take out with a Texas cash-out refinance?

You can take out up to 80% of your home’s appraised value, minus the amount you still owe on your mortgage.

For example, if your home is worth $300,000 and you owe $150,000, you could potentially take out up to $90,000 in cash ($300,000 x 80% - $150,000).

How long does the cash-out refinance process take in Texas?

The process typically takes 30 to 45 days, depending on the lender and your individual circumstances.

This includes the time needed for appraisal, underwriting, and closing.

What is the 2% fee rule in Texas and what are the costs associated with cash out refinance?

Common costs include origination fees, appraisal fees, title insurance, and closing costs, which are capped at 2% of the loan amount in Texas. These costs can often be rolled into the new loan.

State-specific rules surrounding cash-out refinancing limit the amount that lenders can charge in closing costs to 2%.

Are there any tax implications for a cash-out refinance in Texas?

Interest on the cash-out portion of the loan may not be tax-deductible unless it is used for home improvements. It’s advisable to consult a tax professional for specific guidance based on your situation.

Can I combine a cash-out refinance with other home equity loans in Texas?

No, once you have a cash-out refinance in place, you cannot take out a Home Equity Loan (HEL) or Home Equity Line of Credit (HELOC) on the same property in Texas.

What happens if I’ve had a foreclosure, bankruptcy, or short sale?

If you have experienced foreclosure, bankruptcy, or short sale, you may face a waiting period before you are eligible for cash-out refinancing.

The length of the waiting period varies depending on the lender and the nature of the financial event.

What happens if my home’s value decreases after a cash-out refinance?

If your home’s value decreases, you could owe more on your mortgage than the property is worth, leading to negative equity.

This situation, known as being "underwater," can limit your ability to refinance or sell your home without incurring a loss.

What is homestead protection, and how does it affect cash-out refinancing in Texas?

Homestead protection limits the amount you can borrow against your primary residence, capping the loan-to-value (LTV) ratio at 80%. This ensures you retain at least 20% equity after a cash-out refinance.

How does homestead protection impact second homes and investment properties?

Homestead protection applies only to your primary residence. Therefore, the rules for cash-out refinancing, including the 80% LTV cap, are specific to homestead properties.

Second homes and investment properties are not subject to these homestead protections, allowing for more flexibility in refinancing, but they also do not benefit from the same legal safeguards.

What are the seasoning period requirements for cash-out refinancing in Texas?

Texas has two key seasoning requirements for cash-out refinancing:

• Six-month seasoning: Your existing mortgage must be at least six months old before you can apply for a cash-out refinance.
  
  
• Twelve-month seasoning: After completing a cash-out refinance, you must wait 12 months before being eligible for another one on the same property.

Are there exceptions to the 12-month seasoning period?

No, the 12-month seasoning period is strictly enforced in Texas with no exceptions.

Will taking cash from your home’s equity affect your taxes?

Accessing cash from your home’s equity through a cash-out refinance may have tax implications.

The cash itself isn’t taxable because it's considered a loan, not income. However, tax deductions on the interest may apply depending on how the cash is used.

Always consult a tax advisor for advice tailored to your situation.

Is the cash from a cash-out refinance taxable?

No, the cash you receive from a cash-out refinance is not taxable. The IRS views this money as a loan that you must repay, not as income.

Depending on your situation, there could be tax benefits, especially if the funds are used for home improvements.

Can you get a tax deduction from a cash-out refinance?

You may be able to deduct interest on your original loan balance, but the interest on the additional cash-out portion may only be deductible if the funds are used for specific purposes, like home improvements.

For the tax years 2018 through 2025, interest paid on funds used for personal expenses, such as paying off credit card debt, is not deductible.

How does deducting mortgage interest from taxes work?

Generally, you can deduct interest on mortgage balances up to $750,000 if you file as single or jointly.

If married and filing separately, the limit is $375,000 per person. Points paid to secure a cash-out refinance may also be deductible.

For more detailed information, refer to IRS Publication 936 or consult your tax professional.

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