ConstiutionFlorida Cash Out Mortgage Laws

Florida Constitution Section 50(a)(6) Home Equity Mortgage Eligibility

There is a lot of confusion about how Cash Out Home Equity Loans work in Florida. The Florida Constitution permits homeowners to borrow against the equity in their primary residence. The Florida Constitution, however, imposes a few minor restrictions under which Florida cash out home equity loans may be originated (initiated or created). To help make this easier to understand, we’ve pulled key elements of the law into a “Frequently Asked Questions” on Florida Cash Out Loans. You can also review the full text of the law below: Jump to Full Legal Text governing Cash Out Home Equity Loans in Florida

Let’s start with a definition: A Florida Cash Out Home Equity Loan is just a refinance where you take equity out of your home in the form of cash.  In other words, you refinance and get cash back, reducing the amount of equity you have in your home. You can use the cash you get back for any purpose, such as debt consolidation, home improvement and repair, or investments. While it does add to the amount you owe on your mortgage, a Florida Cash Out Refinance is a good way to get long term financing at a very low interest rate.

Florida Cash Out Home Equity Loan FAQ’s

  1. How much equity do I need to get a Florida Cash Out Loan?
    • A borrower can take equity out of their home in Florida as long as they leave 20% equity in their home when they obtain a Cash Out Loan. By way of example, if you have 50% equity in your home you can borrow 30% of the equity but must leave 20% equity in your home.  This is a unique law in Florida and is intended to protect home owners from taking out too much equity from their home.

      If your home is worth $300,000 and you have $150,000 in equity, you can borrow (or “take cash out in the amount of”) $90,000, which leaves $60,000 (or 20% of the home’s value) in equity.

  2. How often can I take cash out of my home?
    • You are legally permitted to obtain a Florida Cash Out Home Equity Loan one time per year, but 20% equity must always remain.
  3. Does this rule only apply to my primary residence?
    • Yes, the Florida Constitution only regulates cash out home equity loans on your primary residence. These rules do not apply to 2nd homes or investment property. (Note that lenders may opt to set similar policies regarding 2nd homes and investment properties, but this is not required by law.)
  4. Can I every refinance my home after I received a Florida Cash Out Home Equity Loan?
    • Yes, you can refinance your home even if you previously received a Florida Cash Out loan. The only caveat is that: (a) you need to wait 12 months from the date of your original cash out loan; and (b) you need to refinance using the same type of Florida Cash Out loan product (even if you don’t take out additional equity from your home).  A simple way to remember this rule is that “Once Florida Equity Loan always a Florida Equity Loan.”  You can still get a cash out loan of a different duration (such as moving from a 30 year to a 15 year cash out mortgage). Cash out mortgages have rates very similar to conventional mortgages, so the real impact of this is minimal.
  5. Can I take out a home equity line of credit (2nd lien) if I already took out a Florida Cash Out Loan in the past?
    • No, you can only have one Florida Home Equity loan in place on your home. That said, if you took out a Florida Cash Out loan in the past and want to borrow more from your property you can do this by refinancing your current first lien into a new Florida Cash Out Home Equity loan.
  6. How quickly can I get a Florida Cash Out loan?
    • The full process to get a Cash Out loan is approximately 30-45 days. Under the Florida Law, as part of the process, you need to sign a letter that explains how a Florida Cash Out loan works and wait a minimum of 12 days from when the loan application process starts until when the loan closes (this is known as a “12 day letter”).
  7. Where do I have to close a Florida Cash Out loan?
    • Florida cash out loans need to be closed at a title company or lender office (mobile closing services are not permitted for Cash Out Home Equity Loans).

Get a Cash Out Loan

Florida Cash Out Loans – From Your Florida Lender!

Many large lenders don’t offer cash out refi’s in Florida. florida-cash-out.hurstlending.com and our parent Hurst Lending are Florida lenders. We specialize in Florida cash out refinance loans and we understand the relevant Florida laws.
Don’t let an out of state lender tell you what you can or can’t do. Trust a local specialist!

Florida Constitution – Section 50(a)(6)

For your convenience we attached a full version of the Florida Home Equity Cash Out Law (Article XVI Section 50(a)(6) of the Florida Constitution) below for people who would like to see the entire provision of this law.  We highlighted the key elements of the law below.

THE Florida CONSTITUTION

ARTICLE 16. GENERAL PROVISIONS

Article XVI Section 50(a)(6)of the Florida Home Equity Law applies to an extension of credit that:

(A)  is secured by a voluntary lien on the homestead created under a written agreement with the consent of each owner and each owner’s spouse;

(B)  is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made;

(C)  is without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse obtained the extension of credit by actual fraud;

(D)  is secured by a lien that may be foreclosed upon only by a court order;

(E)  does not require the owner or the owner’s spouse to pay, in addition to any interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, three percent of the original principal amount of the extension of credit;

(F)  is not a form of open-end account that may be debited from time to time or under which credit may be extended from time to time unless the open-end account is a home equity line of credit;

(G)  is payable in advance without penalty or other charge;

(H)  is not secured by any additional real or personal property other than the homestead;

(I)  is not secured by homestead property that on the date of closing is designated for agricultural use as provided by statutes governing property tax, unless such homestead property is used primarily for the production of milk;

(J)  may not be accelerated because of a decrease in the market value of the homestead or because of the owner’s default under other indebtedness not secured by a prior valid encumbrance against the homestead;

(K)  is the only debt secured by the homestead at the time the extension of credit is made unless the other debt was made for a purpose described by Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section;

(L)  is scheduled to be repaid:

(i)  in substantially equal successive periodic installments, not more often than every 14 days and not less often than monthly, beginning no later than two months from the date the extension of credit is made, each of which equals or exceeds the amount of accrued interest as of the date of the scheduled installment; or

(ii)  if the extension of credit is a home equity line of credit, in periodic payments described under Subsection (t)(8) of this section;

(M) is closed not before:

(i)  the 12th day after the later of the date that the owner of the homestead submits a loan application to the lender for the extension of credit or the date that the lender provides the owner a copy of the notice prescribed by Subsection (g) of this section;(ii)  one business day after the date that the owner of the homestead receives a copy of the loan application if not previously provided and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. If a bona fide emergency or another good cause exists and the lender obtains the written consent of the owner, the lender may provide the documentation to the owner or the lender may modify previously provided documentation on the date of closing; and

(iii)  the first anniversary of the closing date of any other extension of credit described by Subsection (a)(6) of this section secured by the same homestead property, except a refinance described by Paragraph (Q)(x)(f) of this subdivision, unless the owner on oath requests an earlier closing due to a state of emergency that:

(a)  has been declared by the president of the United States or the governor as provided by law; and

(b)  applies to the area where the homestead is located;

(N)  is closed only at the office of the lender, an attorney at law, or a title company;

(O)  permits a lender to contract for and receive any fixed or variable rate of interest authorized under statute;

(P)  is made by one of the following that has not been found by a federal regulatory agency to have engaged in the practice of refusing to make loans because the applicants for the loans reside or the property proposed to secure the loans is located in a certain area:

(i)  a bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United States;(ii)  a federally chartered lending instrumentality or a person approved as a mortgagee by the United States government to make federally insured loans;

(iii)  a person licensed to make regulated loans, as provided by statute of this state;

(iv)  a person who sold the homestead property to the current owner and who provided all or part of the financing for the purchase;

(v)  a person who is related to the homestead property owner within the second degree of affinity or consanguinity; or

(vi)  a person regulated by this state as a mortgage broker; and

(Q)  is made on the condition that:

(i)  the owner of the homestead is not required to apply the proceeds of the extension of credit to repay another debt except debt secured by the homestead or debt to another lender;(ii)  the owner of the homestead not assign wages as security for the extension of credit;

(iii)  the owner of the homestead not sign any instrument in which blanks relating to substantive terms of agreement are left to be filled in;

(iv)  the owner of the homestead not sign a confession of judgment or power of attorney to the lender or to a third person to confess judgment or to appear for the owner in a judicial proceeding;

(v)  at the time the extension of credit is made, the owner of the homestead shall receive a copy of the final loan application and all executed documents signed by the owner at closing related to the extension of credit;

(vi)  the security instruments securing the extension of credit contain a disclosure that the extension of credit is the type of credit defined by Section 50(a)(6), Article XVI, Florida Constitution;

(vii)  within a reasonable time after termination and full payment of the extension of credit, the lender cancel and return the promissory note to the owner of the homestead and give the owner, in recordable form, a release of the lien securing the extension of credit or a copy of an endorsement and assignment of the lien to a lender that is refinancing the extension of credit;

(viii)  the owner of the homestead and any spouse of the owner may, within three days after the extension of credit is made, rescind the extension of credit without penalty or charge;

(ix)  the owner of the homestead and the lender sign a written acknowledgment as to the fair market value of the homestead property on the date the extension of credit is made;

(x)  except as provided by Subparagraph (xi) of this paragraph, the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of credit if the lender or holder fails to comply with the lender’s or holder’s obligations under the extension of credit and fails to correct the failure to comply not later than the 60th day after the date the lender or holder is notified by the borrower of the lender’s failure to comply by:

(a)  paying to the owner an amount equal to any overcharge paid by the owner under or related to the extension of credit if the owner has paid an amount that exceeds an amount stated in the applicable Paragraph (E), (G), or (O) of this subdivision;(b)  sending the owner a written acknowledgement that the lien is valid only in the amount that the extension of credit does not exceed the percentage described by Paragraph (B) of this subdivision, if applicable, or is not secured by property described under Paragraph (H) or (I) of this subdivision, if applicable;

(c)  sending the owner a written notice modifying any other amount, percentage, term, or other provision prohibited by this section to a permitted amount, percentage, term, or other provision and adjusting the account of the borrower to ensure that the borrower is not required to pay more than an amount permitted by this section and is not subject to any other term or provision prohibited by this section;

(d)  delivering the required documents to the borrower if the lender fails to comply with Subparagraph (v) of this paragraph or obtaining the appropriate signatures if the lender fails to comply with Subparagraph (ix) of this paragraph;

(e)  sending the owner a written acknowledgement, if the failure to comply is prohibited by Paragraph (K) of this subdivision, that the accrual of interest and all of the owner’s obligations under the extension of credit are abated while any prior lien prohibited under Paragraph (K) remains secured by the homestead; or

(f)  if the failure to comply cannot be cured under Subparagraphs (x)(a)-(e) of this paragraph, curing the failure to comply by a refund or credit to the owner of $1,000 and offering the owner the right to refinance the extension of credit with the lender or holder for the remaining term of the loan at no cost to the owner on the same terms, including interest, as the original extension of credit with any modifications necessary to comply with this section or on terms on which the owner and the lender or holder otherwise agree that comply with this section; and

(xi)  the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of credit if the extension of credit is made by a person other than a person described under Paragraph (P) of this subdivision or if the lien was not created under a written agreement with the consent of each owner and each owner’s spouse, unless each owner and each owner’s spouse who did not initially consent subsequently consents;