There are a lot of reasons you might want to pull equity out of your home. Equity can be used to finance a sudden medical cost, to help you survive a period of unemployment, to generate money for a college fund, to consolidate bills and debts, or to remodel your home.
You can use your home’s equity for any purpose really—though it’s usually best not to do so unless that purpose is extremely important to you.
If you do want to pull equity out of your home and you have an FHA insured mortgage, then you may be able to use the FHA Streamline option. Streamlined Refinance is a way for you to reduce the interest rate on your current loan with minimal hassle by diving into your equity.
FHA Streamlined Refinance helps lenders to simplify their paperwork and get your refinance processed more quickly than might otherwise be possible. There are limitations to the Streamlined Refinance. You can’t get a lump sum of cash, for example. All you can do is alter your interest rate. This in turn drops your monthly payments, which should theoretically free up some of your money each month.
It is of course up to you to diligently save this money for whatever purpose you plan to use it. Some people even get refinancing just to set the money aside for emergencies. Having a bit more liquidity in your life can make all the difference in the world in a time of dire need.
There are of course requirements which you need to meet to qualify for FHA Streamlined Refinance. The loan you want to refinance must be insured by the FHA already. You cannot be delinquent in your payments on that loan or you will not qualify for refinancing.
Don’t have an FHA-insured loan?
If you have a conventional loan on your home you may still try applying for an FHA refinance loan. While this is a different process, it can generate many of the same results. You can still save money every month, and since the process is through the FHA, it is relatively straightforward. You can only get FHA refinancing of any sort for a home which you inhabit as your primary residence.
Are there drawbacks to getting FHA Streamlined Refinance?
The main drawback of refinancing is of course that you will lose equity in your home, which you have presumably spent a number of years building up. On the other hand, having liquidity can be worth it. It really depends on what you need or want it for. It is highly recommended that you only consider refinancing if the money will indeed fulfill a truly important need in your life.