If you have a major expense coming up and you are short on funds, there is a simple way to get the funds that you need. By doing a cash-out refinance on your home, you can tap into the equity of your home, get a new mortgage for a higher amount than what you still owe on your house, and use the difference to pay for those upcoming expenses.
This refinance option is a powerful way to make your home equity work for you while giving you a chance to get a better interest rate on your new mortgage. By borrowing more than the balance of your original mortgage, after you pay off your old mortgage with the new loan, the money left over from your new loan is the "cash out" portion of the loan. This is money that you can use to pay for any significant life expenses for yourself and your family.
There are no restrictions on what you can use the money for. Perhaps your kitchen has been needing an update for years and you have not been able to afford it. Maybe you have been postponing a medical procedure due to a lack of funds. With the cash-out funds, you can now pay for these expenses.
This is also a good way to pay off any credit card debts that carry a much higher interest rate. Interest rates on credit cards or personal loans are typically much higher than a mortgage rate. So, even though you will be carrying a bigger mortgage after the refinance, it is still better than carrying a credit card debt or personal debt at much higher interest rates.
Various factors will determine your qualifications for this type of loan. For a conventional cash-out loan, your credit history is one factor that the lender will look at. If your credit score is low, you may not qualify. Also, your home equity needs to be high enough to support the cash-out portion of your home loan. Typically, the amount you want to cash-out cannot be more than 80% of your home's equity. Your debt-to-income ratio also should be no higher than 45%.
The interest rate you get will depend on your credit history and how big of a loan you want. In general, interest rates for cash-out refinances are a little higher than the rates for conventional refinances. Also, there will be closing costs. These costs can be rolled into the new loan balance, but that means you will pay interest on it. If you prefer not to pay interest on it, you can pay it as a lump sum out of your cash-out funds.
There are other criteria for other types of cash-out refinances such as for VA loans, FHA loans, and jumbo loans. A reputable mortgage broker, such as the Moreira Team, can help you find the best refinance option for your particular situation.
If you have major expenses or personal debt that you need to pay off, make good use of the equity in your home. A cash-out refinance is a good option to get these much-needed funds at a good interest rate. Contact the Moreira Team to discuss your needs. They will recommend the best loan option that will meet your long-term goals.
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