There are many reasons why you may find yourself short on cash. Whether you are trying to consolidate your debt, or send a child to college, a cash-out refinance mortgage might be the answer. When you own a home, and you have built up equity, you can access the equity by applying for a cash-out refinance mortgage. It’s a great source of funds, and you can use the money as you need to without having to strain your current budget.
Understanding a Cash-Out Refinance
When you apply for a cash-out refinance mortgage, this takes your existing mortgage and turns it into a new mortgage. You are able to refinance your current mortgage while borrowing up to the value of the home. As long as you have equity in your home, you will be able to receive cash when you secure a cash-out refinance mortgage. You pay back the loan over time, just like your current mortgage.
Talk to your lender to learn more about what your specific options are when you are looking to cash out on the equity in your home.
The Benefits of a Cash-Out Refinance Mortgage
One of the biggest benefits of a cash-out refinance mortgage is that it will typically be at a lower interest rate than if you opened up a home equity line of credit (HELOC) or a home equity loan. Once you get the cash, you can use it to pay off credit cards and raise your credit score if that is one of your financial goals. If you are using some money for home improvements, you might be able to get a tax deduction. This is a question for your accountant when it comes time to do your taxes.
Pay Attention to the Details
Your home is the collateral for the new loan you are securing. Only borrow what you know you can afford to pay back, as you are at risk of losing your home if you are not able to pay the mortgage every month. As this is a new loan, the length of time you spend paying your mortgage may be lengthened. Look over the details and understand what your interest rate is before signing the paperwork.
Be Prepared for Fees
Be prepared to pay fees and other closing costs when you refinance your mortgage. Check to see if you will need to pay for PMI, as this is going to add to your monthly bill. Personal Mortgage Insurance, or PMI, is needed when you are borrowing more than 80% of the cost of the home. It can be dropped once you own 20% of the property.
A cash-out refinance gives you choices when you are looking for a way to come up with more cash. It’s the perfect solution when you are trying to pay for college, or you want to upgrade your existing home. If you need cash and have equity in your home, it’s time to talk with the team at Mid-America Mortgage to find out how you can secure a new mortgage.