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Considering home renovations, debt consolidation or just need to get some cash in hand? A Cashout Refinance Mortgage may be the right fit for you. You can actually refinance your home mortgage for more than you owe and cash out the difference. It may seem like an easy way to get extra cash, but here’s what you need to know to decide whether cash-out refinancing is the best option for you.
Reasons for cash-out refinancing
Cash-out refinancing could help you save a lot of money. It’s always wise to calculate the potential savings with your goals in mind. Are you refinancing for a short-term or long-term reason? Here are some good reasons for cash-out refinancing:
- Get Cash Back: Do you need to get cash for a special project, vacation, business, college or even vacation? Cashout refinance may allow you to access cash in the equity of your home to make it happen.
- Home renovations: Cash-out refinancing would allow you to improve your home, and that would increase its value. For example, if you do a $20,000 cash-out refinance on a $100,000 home, you could potentially increase its value to $150,000 — for just a $20,000 cash out.
- Debt repayment: If your student loans, second mortgage, or credit cards are high, you could do a cash-out refinance and pay off your debts with a lower interest rate. Plus, your credit will improve since you’re paying them off (even though you’re just transferring the debt to your home).
With that said, here’s why you can’t afford to miss out on cash-out refinancing:
1. Mortgage rates are at historic lows. If you bought your house in the 1990s, your mortgage rate may be as high as 7 to 10 percent. But now, mortgage rates have been hovering between 3-5% for many loan options. Now is the time, not only to refinance, but to cash-out. You’ll not only be able to keep your mortgage payments unchanged, but you’ll also be able to cash out at closing.
2. Home prices are increasing. If you choose cash-out refinancing, you still have equity in your home. The risk is not having enough mortgage paid off if home prices begin to dip in the future. That’s when you risk losing equity in your home, along with having a higher total mortgage to pay off. So, right now is a great time to opt for cash-out refinancing, as long as you can pay back the money you cash out in a reasonable timeframe.
3. Home equity can help remove PMI. If you originally put down less than 20% on your home when you first bought it, you’ve been paying private mortgage insurance to ensure the lender against default. Since home prices are increasing, your home equity may have increased. So even if you opt for cash-out refinancing, if your home equity is at 20%, you can drop your PMI payments.
When you decide cash-out refinancing is the right option for you, call Riverbank Finance at (800) 555-2098, and one of our licensed loan officers can help you get the process started. Whatever the reason for the cash out, we’re here to help you get what you need.