Answering Your Cash-Out Refinance Questions

The responsibility of owning a home can seem daunting. It’s a large investment with seemingly constant home maintenance and improvement needs. One day you’ll finally fix the air conditioning unit, only to find the door knob to the laundry room needs to be replaced. Don’t let this scare you out of purchasing a home, though! We call it the joys and tribulations of being a homeowner – an accomplishment that you can be very proud of. When considering taking the leap to purchase a home, keep in mind that you’ll have options like a cash-out refinance in the future, where you can take advantage of equity in your home to help you stay on top of your home improvement goals or any emergencies that may arise.

What is a Cash-Out Refinance?

Let’s start out with a reminder that your home’s equity (amount of the home’s value that’s been paid off) builds over time. A cash-out refinance liquidates that equity, providing you with cash-in-hand in exchange for a new mortgage loan. Additional benefits are that you will usually get a lower interest rate than with other loans or credit cards and sometimes can even shorten the term of your mortgage loan.

What Can I Do with the Money from my Cash-Out Refi?

You can use that money for just about anything you may need or want! Maybe you have some major home repairs that need attending to, or maybe you’d like to catch up on that high-interest student loan debt. Here are just a few more examples of the many things you can do with your cash-out:

Complete the kitchen remodel you always dreamed about
Pay for your child’s college tuition
Purchase a new car or boat
Pay for unexpected medical expenses
Consolidate your debt

Is a Cash-Out Refinance Right for Me?

First you’ll need to determine if you meet the eligibility requirements. While every situation is unique, here are some basic criteria to help determine if you will qualify for a cash-out refinance:

Home equity of at least 20%

Good credit history
Sufficient debt-to-income ratio, usually less than 50%

To determine your home’s value and your eligibility, you’ll need to go through the steps of speaking with a lender and getting a home appraisal. Having an in-depth conversation with your lender about refinancing won’t hurt your credit score or have an effect on your current payments.

If you think a cash-out refinance might be right for you, reach out to someone on our team today. We have the answers to your questions and would love to help you explore your options.