With interest rates remaining near historic lows for the past several years, many of your friends and neighbors may have already told you that they have refinanced their home mortgages once or even a couple of times. A cash-out refinance can provide you with several important benefits, but it is not the best option for all homeowners. By learning more about what a cash-out refinance is and what the pros and cons of this type of refinance loan are, you can make a decision that is best for your current and future plans.
What Is a Cash-Out Refinance?
When you refinance your home mortgage, you can select a rate and term
refinance which does not pull equity out of your home, or you can
select a cash-out refinance to access some of the equity in your
property. You can research your property value and your outstanding
principal balance to determine how much equity you have available. Keep
in mind that most lenders will not allow you to access all of the
equity, and you can obtain more information about the loan amount you
may qualify for by speaking with a mortgage professional.
The Benefits of a Cash-Out Refinance
If you decide to apply for a cash-out refinance loan, you may be able
to walk away from the closing table with tens of thousands of dollars
or more. This is money that you may use for any purpose, including home
improvements, paying off high interest rate credit cards, sending the
kids to college and more. In addition, you may enjoy other benefits from
refinancing, such as lowering your interest rate and mortgage payment
and adjusting your loan term to meet long-term goals.
When a Cash-Out Refinance May Not Be Advisable
A cash-out refinance loan can be beneficial, but there are instances
when it is not the best solution. The loan will adjust principal
reduction, the loan payoff date, the interest charges and other factors.
The adjustment of these factors may make your new loan less
advantageous for you in some cases, so you should carefully consider the
full impact of refinancing before you decide to move forward.
From learning more about the benefits of refinancing to finding a
competitive rate for your new mortgage, there are many factors to
consider. You can speak with a mortgage professional today to inquire
about the cash-out refinance loan terms that you may qualify for and to
explore the options in greater detail. If you are thinking about
applying for a cash-out home loan, contact a lending representative