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 lot 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 make your home nicer
- Any cash you put toward repairs and improvements could increase your home’s value even more
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 or start other investments that provide a higher return than a new mortgage cost
If you are interested in refinancing your home, be sure to reach out to us as soon as possible as rates are expected to increase soon! We urge you to call us at (760) 930-0569 so one of our loan officers will discuss your options with you.