If you’re tracking interest rates right now, you’re probably wondering why anyone would want to refinance. Coming out of record low rates and into an upward trajectory can be dismaying to buyers, but did you know that this is a prime time for homeowners to consider a cash-out refinance?
As rates are going up, why would borrowers want to refinance?
Generally speaking, it’s beneficial to refinance if you can lock in a rate at least .50% lower than your current loan. However, with cash-out refinancing, you may not get a lower rate, but ultimately you’re trading in the equity gained in your home for cold hard cash.You can then use this cash to reinvest in your home. There are a few reasons why you’d want to do this right now:
- Solar – Solar panels have been around for some time, but COVID kicked this trend up a notch when people started spending more time at home. Installing them may require a decent chunk of funds upfront, but the return value is substantial – especially if you own an electric vehicle. The reason a cash-out refinance is a better option than a HELOC to finance solar is because the rates are usually better, you can have a Fixed Rate rather than an adjustable rate and most lenders cap lines of credit off at a certain amount. In the long run, your monthly utility bills will recoup your investment in 8-15 years (variably speaking).
- Accessory Dwelling Unit (ADU) – ADU’s have been known by many names: granny flats, in-law units, backyard cottages, secondary units and more. No matter what you call them, ADUs are an innovative, affordable, effective option for adding much-needed housing in California. Whether you rent them out for immediate cash flow, use them as extra storage, or treat them as guest homes, you will be earning more equity on your property regardless.
- Remodeling – Similar to upgrading to solar panels, HELOCs might not make the cut on a major remodel. On average, home renovations provide a 70% ROI. They are one of the only investments that can improve the quality of life in your living space and increase the value of your home for the future. The home improvements with the best ROI are projects that add functional space and square footage.
If you have any questions regarding cash-out refinances and how you can make your equity work for you, please give us a call at (760) 930-0569 and one of our loan officers will assist you.