"Q: I inherited my fathers house with 2 brothers, I want to buy out brothers - they are asking $80k total, there is no mrtg on house (owned out right). I have high debt $11k consolidated loan, $15k car loan and $20k on credit card - minimum pymnts total $1,400 mnth. I want to ask for a $100k loan, $80k to pay brothers and $20k to pay cr card - I earn $45k yrly, would a cash out refinance be my best option?"
A: Assuming the home value is $120,000, your $100,000 loan ($80,000 for your brothers plus $20,000 in credit card debt would leave you with less than a 20% equity stake in the property, making a cash-out refinance difficult (most lenders will want to see you have at least a 25% remaining stake after the refinance).
Most lenders will qualify you today with not more than a 31% "housing debt" ratio and not more than a 41% total debt ("back end" ratio). Using those percentages, your present income would support a maximum $1,538 per month in debt. Of that, your mortgage would be allowed to take up no more than $1,162.
A $100,000 mortgage @ 4.5% creates a principal and interest payment of $507 per month, leaving you about $1031 per month for taxes, insurance and any other debts which have longer than ten months to complete (your 'consolidated' and auto loans plus any credit card debt would be considered here). If the total of these plus your mortgage bumps you up against your $1,538 cap, the amount you can use for your mortgage is reduced, meaning you won't be allowed to borrow the $100,000 you want, but something less than that instead.
Buying out partners with a cash-out refinance
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