What is Cash-Out Refinance?
Cash-out refinancing is when a loan is taken out to refinance a current loan. The cash-out refinance amount will be higher than the current mortgage loan amount. This difference amount in cash can be used by the borrower to spend on improvements or other projects.
How does Cash-Out Refinance work?
Suppose you bought a $300,000 house with a mortgage loan, and you owe $200,000 on your current mortgage. You have built up equity of $100,000. Now, let’s say you are need of $30,000 to renovate the interior. You can cash-out refinance the $30,000. Your new loan amount would be $230,000 ($200,000 you still owe on your house plus $30,000 that you took out in cash).
Benefits of Cash-Out Refinance
1) Lower Interest Rates: A cash-out refinance usually has a lower interest rate when compared to a HOLEC (home equity line of credit) or a home equity loan.
2) Debt Consolidation: You can use the money from a cash-out refinance to pay your credit card bills. This can save you money on interest if they loan interest is lower than the credit card.
3) Improve Your Credit Score: Paying off your credit cards in full with a cash out refinance can help you achieve a higher credit rating.
4) Tax Deductions: Cash-out refinancing can get you a tax break if the money is used for buying, building, or improving your home.
If you are struggling to find funds for home improvement, or if you’re interested in clearing your existing debts, consider a cash-out refinance. Give us a call to discuss your options at: 646-629-6490.