A cash-out refinance replaces your existing mortgage with a new, larger mortgage. You refinance the existing mortgage with a new mortgage, and you can use the money however you want. In other words, this type of loan essentially turns home equity into cash.
Cash-out refinancing lets you access your home equity through a first mortgage instead of through a second mortgage, like a home equity loan or line of credit. Typically you will need to have 10% to 20% equity left after the refinance. The percentage required varies by lender and whether you’re willing to pay for private mortgage insurance (PMI) on the new loan.
Some benefits of cash-out refinancing:
- It allows you to borrow a large sum of money at a low interest rate
- Your mortgage interest may be tax-deductible
- Your new mortgage may have a lower interest rate than your current mortgage
- You can use the cash however you want
- It can help eliminate high-interest debt, pay for college, or improve your home
- Any cash you put toward repairs and improvements could increase your home’s value
Some examples of how to use cash-out from your home are:
- Debt Consolidation – pay off a HELOC, credit cards, car loans, student loans
- Home Maintenance – repair your roof or replace your water heater
- Home Renovations – complete the kitchen or bathroom remodel you’ve always wanted
- College Tuition – use funds to pay for your children’s educational expenses
- Save – keep the cash to have on hand for emergencies or special events
- Reinvest – use the cash for a down payment on another property or second home expenses
- Invest – add to/start other investments that provide a higher return than a new mortgage cost
If you are interested in refinancing your home, give us a call at (760) 930-0569 and one of our Mortgage Loan Officers can discuss your options with you.
