What is a Cash-Out Refi?
You often hear the term “cash-out refinance” when researching refinancing options on your current loan. But what exactly does this mean?
A cash-out refinance is a refinance option that allows the borrower to receive cash in hand when refinancing their loan. What can be misleading is the fact that refinancing a loan generally means you are lowering the rate or monthly payments on your existing loan. However, with a cash-out refinance, the new mortgage loan balance will be larger than the original meaning your monthly payments will likely increase.
The benefit of a cash-out refinance is basically letting a homeowner cash in on the equity they have built up in their home. There are multiple ways to process a cash-out refinance so finding the right one for you should be done with the help of a mortgage expert.
There are a variety of reasons people choose to refinance their home with a cash-out option. For example, an extensive home renovation or improvement project could require more money than you have in the bank. But if you’ve built up equity in your home, taking that equity and putting it back into the home for improvements is a great way to use a cash-out refinance. Other reasons include paying bills, college tuition, or emergency situations.
Think you might qualify for a cash-out refinance? Talk to a mortgage professional today to learn more about if this is the right loan option for you and your financial situation.