You may have heard of a cash-out refinance lately, as a great number of people are doing it when they need to borrow a lot of money. However, this only is an option if someone has a lot of home equity available to them. A cash-out refinance is when you take a loan out on the value of your home. This type of loan usually has a lower interest rate than other loans since your house is used as collateral.
If you decide to do a cash-out refinance, you have the ability to decrease the loan term or even change the type of loan program you are using. You also do not need to let anyone know what you are doing with the funds you receive – they can go into other areas of investment or even put into an emergency fund if needed. The funds can also be used for home improvements which would increase the value of the home when/if you decide to sell. You may wind up earning more money by the sale of your home.
Keep in mind that a cash-out refinance really only makes sense if you need cash for something and there would be a benefit for you in refinancing the loan you currently have. Keep in mind that when you do a cash-out refinance, you will have to pay a closing cost. Make sure the money would make sense to you before deciding. The term of your mortgage would also start over. It is like you are purchasing your home for the first time – so make sure you look at it in the manner.
You also want to consider the potential that mortgage rates may increase, which might have an effect on your final decision. It could also decrease again – but more than likely that will not happen.
If you need help figuring out if this option is right for you, we are here to answer any questions you might have!