A Closer Look at California Cash Out Mortgage Laws

California homeowners who need access to funds may have the option of taking out a home equity loan. While the laws governing California cash out mortgages can be tricky, you do not need to know all the details before applying for a home equity loan. If you understand the most importantrestrictions, you will be good to go.

Can I take cash out of my home anytime I want?

If this will be your first home equity loan, there is no time restriction in place. However, there is a money restriction. In order toqualify, you cannot owe more than 80 percent of your home’s market value between your mortgage and the home equity loan, should it be approved. Phrased another way, you must be able to take out the loanand still keep a minimum of 20 percent equity in your home. Most homeowners do not have that much equityuntil they have owned their home for several years, so while not a time restriction per se, it can function that way.

For those who are trying to take out a second home equity loan, there is a time restriction. You cannot take out two home equity loans in less than a year’s time. Many lenders will also refuse to issue a new loanunless the previous one has been paid off.

Does the law only address my primary residence?

Yes, cash out mortgage laws in California only address primary residences. However, lenders often apply the same rules to secondaryhomes and investment properties as a matter of company policy. If this is a concern, you could shop around for a lender willing to work with you.

Can I refinance my mortgage after I have taken out a home equity loan?

Yes, California law does allow you to refinance your mortgage after taking out a home equity loan. However, it does require that you wait 12 months after the date your cash out loanwas issued. It also requires that you use the same cashout product, which can be problematic. Home equity lines of credit (HELOC) are also restricted as they are seenas a home equity loan, and two home equity loans cannot be taken out on a home simultaneously.

How long does it take to qualify for a home equity loan in California?

The process usually takes at least 30 days. Your lender should be able to determine if you qualify for a home equity loan in California within an hour or less, but the law requires that you wait 12 days between applying for the loan and proceeding with loanprocess. Thisis called the 12-day letter. The purpose of this waiting period is to give the borrower time to read up on these types of loans and decide if they reallywish to move forward.

Where do I need to go to close a cash out loan in California?

To close a cashout loanin California, you will need to appear in person at either the lender’s office of that of the title company. You are not allowed to send a representative in your place, andyou cannot sign electronically.

Come see one of our mortgage professionals today to discuss your cash out mortgage loan options.