A refinance is when you take equity out of a property that you already own. These funds may be used for many reasons, to name a few:
- to invest
- to renovate
- a second home
- for debt consolidation
With major lenders you are allowed to draw up to 80% of the value of your home. To calculate how much equity is available to you:
Step 1: Calculate the Maximum Mortgage Allowed
Value of Home * 80% = "a"
Step 2: Calculate the Equity Available to You
"a" - Current Mortgage Amount =
If the final amount in Step 2 is a positive number, then that is the amount of equity that can be drawn out (OAC). If the number is negative, you cannot yet refinance the property.
What are the costs?
Legal Costs: you can use a lawyer or often the lenders will offer a title insurance company as another option. Title insurance companies can prepare and process legal documents for refinances only. So rather than meet with a lawyer, you would meet with a rep to sign these documents with you. Plan on a cost of $500 - $750 for a title companies service.
Appraisal: the lender will most likely request an appraiser go into the home to determine the current value. Cost approx: $300