If you've built up some equity in your home, you may be able to "cash out" some of that equity to pay off credit cards or other revolving debt, improve your home, help pay for college, or anything else you can think of. The same is true of refinancing costs: If you have enough equity in your home, you may choose to roll some, if not all, of your closing costs into your new loan. Some of the settlement costs and fees you will incur on a refinance transaction include prepaid interest, lender fees, title and escrow fees; appraisal and credit report fees; escrow reserves if required, and property taxes, to name a few. On a refinance transaction, these costs can typically be rolled into your new loan, providing that doing so does not make you exceed the lender's loan to value guidelines. It is not possible to do the same on a purchase transaction, though the seller can sometimes pay a portion of your closing costs if you negotiate this as a part of your purchase.

If you've had your current mortgage for a few years, chances are you've built up enough equity to roll your closing costs into your new loan amount and and still have a smaller loan balance than you originally had. There are many ways of structuring your financing and we will work with you to determine the optimum strategy, given your goals. And of course, you can always write a check at close of escrow to pay for these fees, and your loan amount will be lower if you do.

Many loan programs are based on what's called a "loan-to-value" ratio and the maximum loan to value that lenders allow varies depending on whether you are taking cash out in your refinance, or are not. Rolling your closing costs into your mortgage does not make your refinance a cash out transaction unless you receive more than $1000 back at close of escrow. You may qualify for a very advantageous cash out refinanced mortgage if you borrow no more than 75 percent of your home's value, but may not qualify for the same terms if you borrow 80 percent. You may qualify for loan programs for as much as 100 percent of your home's value, but, generally speaking, you would want to do this in combination with a second mortgage so that you could keep the loan to value lower on your first mortgage. In most cases, the lower your loan to value, the better the rate. Ask me to explain in greater detail the ins and outs of cash out and no cash out refinances. You'll be surprised by the number of options that exist for qualified borrowers.