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CASH OUT REFINANCE MORTGAGE

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Cash-out Refinance mortgage loans are essential for restructuring debt or for paying off other debt. When paying off debt, the mortgage payment will usually increase, but the overall debt payments decrease. The monthly overall payments will decrease, along with the length of time to payoff the other loans. The key for long term financial strength is to not use other sources of credit again to stay out of debt. We offer cash-out refinance loans in Arizona, Colorado, Florida, Idaho, Texas, Utah & Wyoming. Get an Instant Online Rate Quote Apply Now

What’s A Cash-Out Refinance?

As your mortgage matures, you gain equity in your home. Equity refers to the amount of a home’s value that you actually own. You can gain equity in two ways:
  1. Your home increases in value.
  2. You pay down your mortgage principal through your monthly mortgage payments. Every time you make a monthly payment on your loan, you gain a bit more equity in your home.
A cash-out refinance takes advantage of the equity you’ve built over time and gives you cash in exchange for taking on a larger mortgage. In other words, with a cash-out refinance, you borrow more than you owe on your mortgage and pocket the difference. Unlike when you take out a second mortgage, a cash-out refinance doesn’t add another monthly payment to your list of bills – you pay off your old mortgage and replace it with your new mortgage. For example, let’s say that you bought a home for $200,000 and you’ve paid off $50,000. This means you still owe $150,000 on your home. Let’s also say that you want to make $20,000 worth of renovations. With a cash-out refinance, you take a portion of your equity and then add what you’ve taken out onto your new mortgage principal. This means your new mortgage would be worth $170,000 – the original $150,000 you owed on the home plus the $20,000 you need for renovations. Your lender gives you the $20,000 in cash a few days after closing. When you refinance, you can do anything you want with the money you take from your equity. You can make repairs on your property, catch up on your student loan payments or cover an unexpected medical or auto-bill. Cash-out refinances also usually give you access to lower interest rates than credit cards.

A cash-out refinance replaces your existing mortgage with a new home loan for more than you owe on your house. The difference goes to you in cash and you can spend it on home improvements, debt consolidation or other financial needs. You must have equity built up in your house to use a cash-out refinance.

Traditional refinancing, in contrast, replaces your existing mortgage with a new one for the same balance. Here’s how a cash-out refinance works:

  • Pays you the difference between the mortgage balance and the home’s value.

  • Has slightly higher interest rates due to a higher loan amount.

  • Limits cash-out amounts to 80% to 90% of your home’s equity.

Pros of a cash-out refinance

Lower interest rates: A mortgage refinance typically offers a lower interest rate than a home equity line of credit, or HELOC, or a home equity loan.

A cash-out refinance might give you a lower interest rate if you originally bought your home when mortgage rates were much higher. For example, if you bought in 2000, the average mortgage rate was about 9%. Today, it’s considerably lower. But if you only want to lock in a lower interest rate on your mortgage and don’t need the cash, regular refinancing makes more sense.

Debt consolidation: Using the money from a cash-out refinance to pay off high-interest credit cards could save you thousands of dollars in interest.

Higher credit score: Paying off your credit cards in full with a cash-out refinance can build your credit score by reducing your credit utilization ratio, the amount of available credit you’re using.

Tax deductions: The mortgage interest deduction may be available on a cash-out refinance if the money is used to buy, build or substantially improve your home.