Cash-Out Refinance
Use the equity you’ve built up in your home.
Cash out today for a better tomorrow.
Home Loans Cash-Out Refinance
With a cash-out refinance, you use the equity you’ve built up in your home to get cash for other expenses. Tapping into your home’s equity is an ideal way to get extra money.
It’s important to note that when you refinance your existing mortgage to get cash out, you’ll be subject to most of the same underwriting criteria as when you purchased your home. You may need to prove that you have a debt-to-income ratio that qualifies, or that you can afford to make higher monthly payments than you have now. In addition, you’ll likely need to provide supporting documentation that includes proof of income via W2s, 1099s, retirement statements, bank statements, and/or tax returns.
What are the benefits to a Cash-Out Refinance?
The biggest advantage to a cash-out refinance is the obvious one — cash! Depending on how much equity you’ve built up in your home, you may be able to receive a significant amount of cash back that you can use for a variety of purposes.
For example, using funds from a cash-out refinance to pay off high-interest loans and credit accounts can help you lower your monthly payments now, and could have a major impact in the long run by decreasing the amount of interest you pay over time. You could also use the cash to pay for home repairs or renovations, which could increase the value of your home and give you even more equity in the property.
Should you refinance?
Wondering if refinancing your mortgage could save you money? If today’s interest rate is lower than the rate on your current mortgage, there’s a good chance it could. Our team can help you determine how much you could save and if refinancing makes financial sense.
What are the costs of a Cash-Out Refinance?
Much like if you’re simply refinancing your mortgage for a lower interest rate, there will be closing costs associated with a cash-out refinance, which on average will range between 3%-6% of the total mortgage amount. It’s important to carefully consider these closing costs when making a final decision about whether a cash-out refinance makes financial sense for you, especially if you’re:
- Planning on moving in the next few years, since you may not be in the house long enough to recoup closing costs.
- Paying off other debt, since your potential savings on interest payments might not be worth the cost.
Frequently Asked Questions
When you use the equity in your home to get money via a cash-out refinance, you can use that money for anything you choose. You can pay off your credit cards, eliminate student loans, make home improvements, start a new business, or even put a down payment on an investment property.
There are many great reasons for refinancing, including:
- You’d like to lower your interest rate or monthly mortgage payments
- You need cash, fast
- You’d like to consolidate debt
- You’re looking to shorten your payback term
- You want to switch from a variable-rate to a fixed-rate mortgage to create regular, predictable payments
- You’d like to get a variable-rate mortgage with better terms
Refinancing is usually a much simpler process than buying a home. Typical steps in the process include:
- Research the value of your home and check your credit scores.
- Gather all needed documents and apply for the refinance.
- After your loan is approved, the underwriting process begins—the time for careful review.
- Sign your papers and close your loan.
A Home Equity Line of Credit (HELOC) is a line of credit that allows you to borrow against your home equity.
HELOCs usually have a variable interest rate that changes over time. For most HELOCs you can borrow money for a specified time. During this time, known as the “draw period,” you can make multiple withdrawals and may make monthly payments. When the draw period ends, you may no longer be able to borrow money from your line of credit, and you may make monthly payments to repay your outstanding principal and interest over a period of time. During this time, known as the “repayment period,” you may not be able to borrow additional amounts.
HELOCs usually have a variable interest rate that changes over time. For most HELOCs you can borrow money for a specified time. During this time, known as the “draw period,” you can make multiple withdrawals and may make monthly payments. When the draw period ends, you may no longer be able to borrow money from your line of credit, and you may make monthly payments to repay your outstanding principal and interest over a period of time. During this time, known as the “repayment period,” you may not be able to borrow additional amounts.
A HELOC and a cash-out refinance both use the equity in your home to get you the cash you need for other expenses. HELOCs work somewhat like a credit card. There is a draw period where you use what you need, when you need it. During the draw period, you are typically making interest-only payments, and the interest rate is usually adjustable.
With a cash-out refinance, you replace your current mortgage with a new mortgage to help with expenses such as tackling home improvements or paying off other debt. With a fixed-rate cash-out refinance, you know exactly what your rate will be and what you will pay each month.
The best option for you depends on your financial need and situation. Lending Hand does not offer HELOCs, but our mortgage specialists can help you decide.
With a cash-out refinance, you replace your current mortgage with a new mortgage to help with expenses such as tackling home improvements or paying off other debt. With a fixed-rate cash-out refinance, you know exactly what your rate will be and what you will pay each month.
The best option for you depends on your financial need and situation. Lending Hand does not offer HELOCs, but our mortgage specialists can help you decide.
Get pre-qualified today!
We are here to help you find the right mortgage loan for your needs.
How Can We Help?
Connect with one of our loan experts.
800-555-1234
