When Does A Cash-Out Refinance Make Sense?
With so many people facing financial uncertainty, cash-out refinancing could help. Homeowners may want to refinance to take advantage of the low interest rates, change the term of their loan or switch from an adjustable rate mortgage to a fixed rate. #REFINANCE
A cash-out refinance is different from a traditional refinance, in that it replaces the current loan with a new larger loan. The difference between what was borrowed and the balance of the previous loan, is the “cash-out” amount.
As mentioned in my, “Interested in Cash-Out Mortgage Refinancing?” article, most homeowners use cash-out refinancing for their child’s college education, home renovation or debt consolidation.
According to Forbes, there are approximately 45 million homeowners with more than $6 trillion in available equity.
Cash-out refinancing offers significant advantages over other types of financing, such as home equity loans or home equity lines of credit. In most instances, borrowers can get a lower rate on the cash-out refi.
Also, the cash-out refi is usually easier to obtain and since it is a primary mortgage, instead of a second, it reduces the risk for lenders.
The main limit to a cash-out refi is the equity. Is there enough to pay the current mortgage, plus enough to cover the associated costs?
If you are considering a cash-out refi, contact the experts at Vanmar Lending. They can help you decide whether the benefits exceed the cost.