Understanding the Refinancing Process in Massachusetts

It’s no surprise to any homeowner in Massachusetts that property here is mighty expensive. Massachusetts is the third most expensive state in the country, with the average home price north of $650K. Here at Dovetail Mortgage, a mortgage company in Braintree, MA, we have noticed that a lot of people are newly interested in refinancing. So without further ado, here’s a bit of insight into the refinancing process in Massachusetts. 

Refinancing Process in Massachusetts

If you’re looking to refinance your home in Massachusetts, you’re in luck. According to Business Insider, Massachusetts is one of the easiest states in the country to refinance. Refinancing can allow you to have lower interest rates on your loans which will make it much easier for you to improve your financial stability. 

What Is Cash-Out Refinancing?

Cash-out refinancing is when a homeowner leverages the value that they have in their home. This process involves borrowing more than you owe and receiving the difference in cash. For example: if your home is worth $450K and you owe $300K, that leaves you with $150,000 in equity. Lenders normally allow you to borrow around 80% of your home’s value with cash-out refinancing, which in this case would be $360,000. This gives you $300,000 for your mortgage as well as $60,000 in cash. 

This does not mean that you will be able to walk away with that $60K. In most cases, you will need to pay closing costs which could be anywhere from 2-5% of your home’s price. 

How Much Cash Can I Receive When I Refinance?

The amount that you receive depends on a variety of factors, such as the amount of equity you have, the type of refinancing that you use, and the lender you work with. Typically, most lenders will allow you to borrow up to 80% of your home’s value. If you are a veteran, you will be allowed to borrow 100% of your home’s value. 

What Can The Cash Be Used For?

Homeowners often use the cash from their refinancing for many different things, such as:

• Paying off debts
• Tuition payments
• Purchasing a second property
• Investing
• Home improvement costs

And more. 

Massachusetts Refinancing Options

In the state of Massachusetts, there are three options for cash-out refinancing. 

Conventional

This option is the most ideal for a homeowner with a high credit score and a home with a solid amount of value. Borrowing for a conventional cash-out is capped at 80%. This type of loan does not require private mortgage insurance.

FHA 

Borrowing for an FHA is capped at 80%. This option is best suited for homeowners with lower credit scores, or those who have experienced bankruptcy. This type of loan requires private mortgage insurance.

VA

To qualify for VA cash-out, you must be a veteran. This option is very advantageous because it allows you to borrow up to 100% of your home’s value. However, we recommend that you only borrow up to 90%. This type of loan does not require private mortgage insurance, but will require a funding fee.

What Are My Other Refinancing Options?

Home Equity Line of Credit (HELOC)

A HELOC (home equity line of credit) is a revolving line of credit, kind of like a credit card. You can borrow money at an adjustable interest rate, which is very helpful if you are planning any long term projects like home renovations. 

Reverse Mortgage

If you are 62 years or older, you are eligible for a reverse mortgage. Instead of making monthly payments to you lender, your lender will make monthly payments to you. You will not have to pay back this loan until you sell your home. While this option may seem enticing, it is certainly not for everyone. A reverse mortgage is best suited for properties that are assets. 

Home Equity Loan

A home equity loan is a second mortgage. You will receive a lump sum payment at a fixed interest rate that you will need to repay over a certain period of time. If you prefer making consistent payments monthly, this option will be great for you. 

About Dovetail Mortgage

Dovetail Mortgage in Braintree, MA is dedicated to providing you with a mortgage process that that is seamless, and simple. Our team has a combined 50-year experience as brokers and lenders. We’ve learned what works and what doesn’t, and we’ve listened to our clients and partners through the years. We are here to provide harmony and simplicity.