Most people think of refinancing as a simple way to lower their interest rate or get some cash out of their home’s equity. But what happens when your situation is a little more unique? Sometimes, a standard refinance just doesn’t fit the bill.

For these special situations, there are unique loan programs and considerations that can make all the difference. As a mortgage lender with 25 years of experience, I’ve helped clients throughout Michigan navigate these special options to find a solution that works for them.

Here are some of the most important special considerations to know about when refinancing:

1. The Delayed Financing Exception

Did you recently buy a home with cash in Michigan to make a more competitive offer, but now you want to get a mortgage on it? This is exactly what Fannie Mae’s Delayed Financing Exception is for.

• What it is: This rule allows you to complete a cash-out refinance on a property you just bought with cash, without waiting the usual 6-month period.
• How it works: Instead of waiting, you can apply for a mortgage right away. This allows you to get your cash back out of the property you just purchased. You must be able to document the source of the funds you used to buy the home, if the source of funds was an unsecured loan or a loan secured by another asset, the new loan must be used to pay off or pay down the loan used to purchase the subject property. The new loan amount cannot be more than the original purchase price plus closing costs.

2. Fannie Mae’s Non-Cash-Out Refinance for Divorce

As a Certified Divorce Lending Professional (CDLP), I know that one of the biggest challenges in a divorce is figuring out what to do with the marital home. Refinancing is often necessary to buy out an ex-spouse’s share of the equity and remove them from the mortgage.

• What it is: Fannie Mae offers a special option that treats a divorce-related equity buyout as a non-cash-out refinance instead of a regular cash-out refinance.
• Why it’s important: This is a big deal because non-cash-out refinances usually have better interest rates and allow for higher loan-to-value (LTV) ratios than cash-out refinances. For a divorcing spouse who needs to keep the home, this can make the difference between qualifying for the loan and not. It helps the person keeping the house get a more affordable loan to buy out their ex-spouse’s interest.

3. Special Considerations for Student Loan Debt

If you’re a Michigan homeowner with student loans, you know how much that monthly payment can impact your budget. Refinancing can sometimes help you manage this debt.

• Fannie Mae Student Loan Refinance: Fannie Mae has introduced solutions to help borrowers with student loan debt. One way is through a Student Loan Cash-Out Refinance, which allows you to use your home’s equity to pay off high-interest student loans. This can consolidate your debt into a single, lower-interest mortgage payment.
• Key things to know: All normal cash-out adjustments to interest rates are waived on this feature, saving borrowers the pain of cash-out rate adjustments, which can be expensive. All proceeds must be used to pay off any or all the student loans, partial payments to student loans are not permitted with this feature.

4. Paying Off a Land Contract in Michigan

Land contracts are a popular way to buy a home in Michigan, but they can come with high-interest rates or a large “balloon” payment at the end. Refinancing can be a great way to pay off the land contract and get a traditional mortgage.

• How it works: The process is like a regular refinance or purchase depending on how long the land contract has been in place. The mortgage lender will pay off the remaining balance of your land contract, and you’ll get a new mortgage with a new rate and term.
• Key things to know: You must have a strong payment history on the land contract, and it’s best to have the land contract officially recorded with the county. Lenders will want to see proof of your payments, so it’s a good idea to keep records of everything, such as bank statements showing withdrawals. Try not to make land contact payment in cash, if possible. If the land contract has been in place for more than 12 months before the new mortgage, it is considered a refinance transaction. If the land contract has not been in place for 12 months, it is considered a purchase transaction. Why does that matter? The property value will be determined by an appraisal based on the current market value for a refinance, where on a purchase the property value will be the land contract price. On a refinance, depending on the appraised value, there is an opportunity to roll in some, or all of the closing costs associated with the refinance, on a purchase that opportunity does not exist. 

4. Refinancing an Inherited Property

Inheriting a property in Michigan can be a wonderful gift, but it often comes with a mortgage. If you want to keep the home, you’ll need to figure out how to handle the existing loan, especially if you have co-heirs.

• How it works: You can refinance the inherited property into a new mortgage under your name. If there are other heirs, you can often do a “cash-out” refinance to pay them their share of the home’s equity, along with the existing mortgage, if any.
• Key things to know: The probate process must be completed if the home was not in a trust, and the property must be legally transferred into your name (or the name of all heirs). The maximum loan amount will be 80% of the current appraised value of the home.

5. Special Programs for Home Renovations

While a cash-out refinance can be a great way to get funds for home improvements, it’s not always enough. If your renovation project is bigger than what your home’s current equity can cover, there are special programs that can help.

• Fannie Mae HomeStyle: This program allows you to finance home improvements by basing your new loan amount on what the home is expected to be worth after the renovations are completed. This is a great tool for a home that needs more significant work.
• FHA 203(k): Similar to HomeStyle, the FHA 203(k) loan is for homes that need repairs. This government-backed loan is particularly good for projects that involve health and safety issues and often have more flexible credit requirements.

These are just a few examples of the special considerations that can be applied to a refinance. It’s always important to look beyond the basic options and see what unique programs and rules might benefit your specific situation.

Do you have a unique situation that you’re not sure a standard refinance can handle? With 25 years of experience in Metro Detroit and throughout Michigan, I specialize in finding creative solutions for all types of homeowners. Contact me today for a personalized consultation to explore all of your refinancing options, no matter how unique your circumstances may be!