What You Need to Know about a Cash-Out Refinance
As mortgage rates remain low, many homeowners are still considering refinancing their homes to lower their current rate and put their home equity to work for them.
If you have been in your home for a while and have built up a significant amount of equity, you may be able to use that to your advantage now. But, how? With a cash-out refinance!
Here’s what you need to know about a cash-out refinance:
What is a cash-out refinance?
One of the greatest benefits of owning a home is the ability to build wealth. When the unexpected happens and you need extra funds, you can use the equity built up in your home with a cash-out refinance. Essentially, you borrow money and refinance your home at the same time.
How does a cash-out refinance work?
A cash-out refinance allows you to replace your existing mortgage with a new mortgage at a larger amount, and you receive the difference in cash. You can use that extra cash to help you achieve your financial goals as there are no restrictions on how you can use the money.
What is the difference between a cash-out refinance and a traditional mortgage refinance?
The main difference between a cash-out refinance and a traditional mortgage refinance is the amount borrowed. When you opt for a traditional mortgage refinance, you replace your existing mortgage with a new one at the same amount.
What can the funds from a cash-out refinance be used for?
You can use funds from a cash-out refinance in many ways. After all, it’s your money!
Remember, you are paying the money back, so spend it wisely! With a cash-out refinance, you can:
- Consolidate high-interest debt (credit cards, auto loans, etc.) into one payment
- Make a major purchase or expense
- Fund home improvements or make repairs and increase your home’s value
- Cover education expenses (college tuition, etc.)
- Purchase an investment property
- Pay for emergency expenses (hospital bills, etc.)
- Boost retirement savings
- Cover the cost of elderly care
- And more!
What are the requirements for a cash-out refinance?
Eligibility requirements for a cash-out refinance may include:
- How much home equity you have
- Credit score
- Income and employment verification
- Loan-to-value ratio (LTV)
- Debt-to-income ratio (DTI)
Keep in mind that additional information may be required.
Is a cash-out refinance the right choice?
A cash-out refinance may be the right choice for you if you have equity built up in your home and would like to secure a good interest rate on a new mortgage loan and use the extra money to purchase things you need.
Reach out to your local HOMESTAR Mortgage Loan Originator for more details and to get started!