A significant number of homeowners have substantial equity built in their homes, and a low interest rate to go with it. There are many who might like a cash-out refinance but can’t see losing their low rate on their mortgage. On top of that, they have unique circumstances where they do not qualify under traditional loan requirements.
A cash-out refinance is typically a practical solution for borrowers who want to tap into their equity for debt-consolidation, home renovations, funding a business or paying for tuition. There is an alternative and you could be the originator to make it happen. The answer you could be looking for is Deephaven’s Non-QM cash-out stand-alone second mortgage product called Equity Advantage.
Promoting a closed-end second mortgage product to your borrowers is a great way to add to your volume in 2024. It is possible that many borrowers need the cash, especially those interested in debt-consolidation. Educating borrowers on the right way to go about tapping into their home equity to get the funds they need to reach financial goals will be appreciated. This post will help you to do just that!
What is a stand-alone closed-end second mortgage?
A stand-alone second mortgage or closed-end second mortgage is a loan that is taken out while the original mortgage, or first lien, is still being repaid. All of the funds are distributed at one time in a lump sum payment.
Deephaven’s Equity Advantage Non-QM second lien product is for primary, second homes, and investment properties with loan amounts up to $500,000. We accept full doc, personal and business bank statements. When promoting this product to your clients make sure to mention that self-employed borrowers can submit bank statements to verify income in lieu of tax returns. Among the property types that qualify are single family residences, townhomes, 2-4 units and warrantable condos.
What are practical uses for cash obtained from equity?
Responsible uses from a cash-out loan include debt consolidation on high-interest credit cards, real estate investments, home renovations or paying for tuition. A cash-out loan can be a great way to achieve a financial goal. One goal could be to reduce or consolidate debt. Funding a home renovation using equity could increase the value of the home.
What is the opportunity in the market for refinances?
The average U.S. homeowner gained around $20,000 in home equity during Q3 of 2023 according to CoreLogic. They report that year over year Q3 2022 to Q3 2023 shows a 6.8% or $1.1 trillion increase in home equity. That’s great news! The not so good news for a number of these homeowners is the debt they might be carrying.
According to the Federal Reserve Bank of New York, total household debt stands at $17.5 trillion. Credit card debt is at $1.129 trillion, and auto debt is at $1.6 trillion. As a result, delinquencies are on the rise. This is when a stand-alone second mortgage could be the solution to help. Second mortgages likely will have a higher interest rate than the first mortgage but lower interest rates than their credit cards.
Even in a market with higher interest rates, cash-out options are still needed. It is just a matter of finding those borrowers to promote your services.
Where can you find borrowers in need of cash?
Chances are you already have referral partners who can help you source borrowers who need to obtain cash from their properties. Let your professional network know you have access to a flexible Non-QM stand-alone second loan for those who are in need of cash to accomplish their goals.
Have them send borrowers your way! Talk to attorneys, community credit unions, tax preparers, CPAs, credit counseling agencies or other sources who offer debt relief. Contact Deephaven today for help with sourcing borrowers.
Interested in pricing a scenario?
Use our blended rate calculator to quickly price a closed-end second mortgage loan: https://deephavenmortgage.
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