Have you been in your home for quite awhile and are thinking about doing some home improvements? Or maybe your credit card balances are getting a bit too high? If you currently own a home and there is equity available in the home you can take out a cash loan for more than your current home loan and get the difference in cash.
What Is Cash Out Refinancing?
This new loan will pay the difference between the value of your current home and the mortgage balance. It will typically have a higher interest rate than your current home loan amount, and there is a limit to how much you can actually take out in a cash-out refinance.
It is possible to do a cash out refinance and get a lower interest rate, but that depends on the status of the market. Interest rates vary depending on the housing market so if you happen to have purchased when rates were higher overall, you might be able to get a lower interest rate even with a cash-out refinance.
One reason people go this route is because they want to use the cash in order to make home improvements. Home improvements will increase the value of the home so a cash-out refinance can be a good decision if you plan on selling a home in the future. This could help pay down the new loan and end up with some cash in your pocket.
Another reason people want to get cash out when they refinance is to pay off debt. If you happen to have high interest credit cards or loans and want to pay them off in one lump sum, a cash-out refinance, might be the best decision for you. It could save you money in the long run from paying interest on credit cards and you could use that money saved to invest back in the home or to pay off the new loan.
Since your debt will decrease, your credit score will increase and that will improve your financial situation overall. Increasing your credit score can help you a lot in the long run if you were to lose a job or have an emergency where you need to access a large amount of your credit immediately.
Things To Consider
The biggest reason a cash-out refinance could be risky is that if you cannot make the payments, you could lose your home due to foreclosure. You want to make sure you are able to make these payments and review your budget thoroughly so your home is not at risk.
Since interest rates and closing costs can vary, you want to discuss these details with a lender to make sure the timing of your refinance won’t put you in a worse financial position. These are things you should always consider when discussing a refinance. The interest rate and closing costs should be factored in when reviewing the terms of the refinance to make sure it’s worth the risk overall.
Reach Out Today!
If you think a cash-out refinance is a good idea for your future, make sure to review your finances and weigh out all your options. Also, consider the reason you need the cash and if you need it now if it can possibly wait. We want to make sure you are making the best decision for you, so please contact North Star Mortgage Network in Jacksonville, FL today!