Helping you with cash-out refinance
Know more why cash out refinance can be the best option for you. Let our mortgage experts help you with this type of refinance.
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Cash-Out Refinance
A cash-out refinance is when you have enough equity to refinance your current mortgage in exchange for a new one. It is perfectly possible. When you’ve done it, you can settle your original mortgage. The finances that remain is all yours for using. This involves refinancing mortgage for more than what you currently owe. You then take the difference in cash. This kind of option can reduce interest rates and monthly mortgage payments. The difference with other refinance options? You acquire cash during the process.
Using the Cash
Lenders aren’t keen on placing many limitations and restrictions on how you spend the cash you get from refinance.
You can use it to:
- Consolidate your debts: paying off high-interest debts like credit cards will allow you to save more, improve your credit score, and transfer the credit card debt to a mortgage debt which is usually tax deductible.
- Pay closing costs: rather than rolling the closing costs of your cash-out refi into the loan, you can pay them upfront.
- Improve the home: Improve the home: doing repairs and upgrades will increase the value of your home in the long run.
- Invest: doing repairs and upgrades will increase the value of your home in the long run.
- Pay expenses: if you have a viable business idea and plan you can finance it using the proceeds from a cash-out refi.
- Make a large purchase: some things like cars require more money than you can save from just your salary.
Using the Cash
Lenders typical don’t put any restrictions or limitations on how you can spend the cash from a refinance.
Centralize your debts
If you haven’t done it yet, perhaps now’s the time to start paying off those high-interest debts. This is so you can save more money, and improve your credit scores. You can also transfer credit card debt to your mortgage debt to make them tax deductible.
Pay off your closing costs
You don’t have to roll closing costs out of your cash-out refinance and into the loan. It’s advisable to pay them upfront instead, so they won’t be part of your mortgage and won’t accumulate interest.
Make improvements on the home
Renovating the house, making upgrades, and investing in regular maintenance can increase the value of a home later on.
Do some investing
Your business ideas and plans can be financed via the proceeds you get from a cash-out refinance.
Pay Your Expenses
You can use the money from a cash-out refinance to help pay for other bills, like utility, education, healthcare, etc.
Making large purchases
There are things in life that require a lot of money to purchase, and they cost more than just your salary. Your cash-out refinance can help with this.
Is a cash-out refinance right for you?
Let our mortgage expert help you determine whether it is the right time to consider a cash-out refinance and help you get the best option.
Why consider a cash-out refinance?
With a refinance option, you can refinance your mortgage while enjoying lower interest rates and favorable lending terms. Aside from that, you can have cash you can use in paying your needs. Using it to pay some of your high-interest debts (particularly credit card) can help you improve your credit score.
Which Mortgages Allow For a Cash-Out Refinance?
- Conventional cash-out refinance- you need to have at least 20% equity to qualify for this.
- FHA cash-out refinance- you are eligible if you have at least 15% equity.
- VA cash-out refinance- for the veterans and service members who qualify for a VA mortgage. Although some lenders allow refinancing 100% of the home’s value, most prefer to limit it to 90%.
Considerations
Although a cash-out refinance has lots of advantages, it also has cons you should consider. To start, you’ll be meddling with a home’s equity, which means that the home’s loan-to-value (LTV) ratio will increase. The higher it goes, the higher and bigger the risk of foreclosure if you fail to pay your mortgage.
Take into account that there are closing costs that might cause your cash-out to refinance to become more expensive than you first thought. It typically adds up to 3-6% of the value of the mortgage.
One more thing that you need to consider is interest rate. Most of the time, you can only get a refinance if you acquire a lower rate. Yes, it it will reduce your monthly payments, but they come with longer terms. And in the long run, that means an increase in the overall amount of the loan.
Is a cash-out refinance right for you?
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Let our mortgage experts help you see whether it is the right time to think about a cash-out refinance and help you get the best option.
