Have you been thinking about refinancing? Do you own your own home? Would a cash out refinance make sense? Here are some ways to decide if it might make sense to do.
For those that have some equity in their home, it may make sense to consider a cash out refinance. Think about any big expenses you have coming up. Maybe a major home repair like replacing a roof or finishing a basement. Maybe you have a lot of debt on credit cards and the interest rate on those are typically fairly high.
A cash out refinance replaces your current mortgage with a new one. And ideally it would be at a lower interest rate than you currently have. You get the equity in one lump sum after you close on the new loan. You can decide how you want to use the money. Maybe you want to do a combination of paying off some debt and fixing some things in your home.
Most cash out refinances require at least 20% equity in your home after you close. In other words, if your home is valued at $350,000 and you currently have a mortgage of $200,000, you could take out a new loan of about $270,000 giving you about $70,000 to use.
There are pros and cons to any refinance whether it is a cash out refi or a rate/term refi. One question I ask borrowers is how long they plan to keep the home. A cash out refi can potentially lower the interest rate on your mortgage, it can be lower than other personal loans. If you are paying off existing debt, it could improve your credit score. You can use the funds for big purchases, home improvement or even to invest. Remember this is a new loan, so you may be extending the term of your mortgage. You will have closing costs to pay – they can be paid from the proceeds of the loan. Depending on your new mortgage, the mortgage payment may be higher than your current loan.
If this is something you are considering, feel free to call me and we can talk about your options. It may be right for you or it may not – but it can be an option if you are looking at ways to free up cash for different projects.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
