When interest rates are low for long periods of time, like we’re seeing right now, refinancing becomes an appealing option for borrowers who want to lower their monthly payment. A unique way to refinance while also accomplishing a number of other financial goals is to seek a cash-out refinance.
This can be a useful financial move, especially if you’ve built up equity in your home. Here’s what you need to know in order to decide if you’re a good candidate for this option.
What Happens in a Cash-Out Refinance?
A cash out refinance is a way to both refinance your mortgage and pull money out of your home’s equity. This is an alternative to the home equity line of credit or home equity loan, and in the current rate environment, this option usually offers a lower interest rate than a traditional option.
The amount you can pull out is determined by the amount of equity in the home. For primary homes you can borrower up to 80% of your home’s value on a cash out transaction.
Like a regular refinance, you’ll need to have an appraisal done to verify the value of the home. Once everything is finalized, a closer will come to finalize all the documents with your signature, and then you’ll be able to use your funds.
What Can I Do With a Cash-Out Refi?
In short, the cash out refi is a useful tool to use the value of your home to take out some much-needed funds while sometimes even lowering your monthly payments as well. If the market conditions are right for it and your personal finances are in good shape, it could be a great way for you to accomplish larger financial goals.
If you’re only looking to save money on your monthly payments, you can still seek a regular refinance without the cash out option.
Why Should I Opt for the Cash-Out Refi?
This is a good avenue to take if you have some projects or bills you need to take care of and a lot of equity in your home. Here are some ways people typically use their funds from a cash out refinance:
• Home Improvements
• Paying Off Debts
• Additional Properties i.e. investments/second home
• Starting a Business or Making Some Other Investment
A cash-out refinance can open a world of options for a responsible borrower. If you have built up equity on your home and could use some extra finances, this option could be perfect for you. To learn more and get your free rate quote, give us a call, shoot us an email, or fill out an online form on our website today. It’s a great time to get started!
This information is the most accurate as of its publish date. The information is subject to change in accordance with federal and state guidelines.