What is a Cash-Out Refinancing?
What is a Cash-Out Refinancing?
When you go for a mortgage refinance, there are several reasons to do it and benefits that go along with those reasons. If you have a sizeable amount of equity built up in your home and wish to convert it into cash in your pocket, you can do a cash-out refinance.
So what exactly is a cash-out refinance? This kind of refinance is when you get a new mortgage on your home and borrow more money than what your existing mortgage is at and you get the difference in cash. So, for example, if you owe $100k on your existing mortgage and you get a new one for $150k, you get that $50k in cash to do what you want. With a cash-out refinance mortgage, you get the equity and can use that towards a big purchase or other debts.
When would this kind of refinancing be a good idea?
What can you use the cash for from this kind of refinance? You can use the money for whatever you want to use it for. Like we said, many people use it to consolidate other debts from high-interest credit cards; this will save you a lot for monthly interest payments. You can take the payments from your mortgage and deduct them from your taxes, which you cannot do with credit card payments. Other common uses for the money include: home improvement, education (such as college), buying investment property, emergency expenses, vacations, care for an elderly family member.
Times when you would not want to do a cash-out refinance would be when you are in need of money to pay off short term expenses. If you want to pay off a car that you plan on keeping for less than ten years, you are better of not doing the refinance; the interest rate will be lower on the mortgage than the car but the mortgage will take a lot longer to pay back than the car loan.
If you have questions about refinancing, then contact TrueFi.
When you go for a mortgage refinance, there are several reasons to do it and benefits that go along with those reasons. If you have a sizeable amount of equity built up in your home and wish to convert it into cash in your pocket, you can do a cash-out refinance.
So what exactly is a cash-out refinance? This kind of refinance is when you get a new mortgage on your home and borrow more money than what your existing mortgage is at and you get the difference in cash. So, for example, if you owe $100k on your existing mortgage and you get a new one for $150k, you get that $50k in cash to do what you want. With a cash-out refinance mortgage, you get the equity and can use that towards a big purchase or other debts.
When would this kind of refinancing be a good idea?
- Consolidating other debts, like large amounts of credit card debts. You can reduce your total interest payments that happen every month.
- When you cannot get financing from other sources for large purchases or investments; perhaps you need a large amount of money to remodel your home or put on an addition to your home.
- When you need a source of money, like point two, but your interest rate for those others sources would be more expensive than what you would get with a refinance.
What can you use the cash for from this kind of refinance? You can use the money for whatever you want to use it for. Like we said, many people use it to consolidate other debts from high-interest credit cards; this will save you a lot for monthly interest payments. You can take the payments from your mortgage and deduct them from your taxes, which you cannot do with credit card payments. Other common uses for the money include: home improvement, education (such as college), buying investment property, emergency expenses, vacations, care for an elderly family member.
Times when you would not want to do a cash-out refinance would be when you are in need of money to pay off short term expenses. If you want to pay off a car that you plan on keeping for less than ten years, you are better of not doing the refinance; the interest rate will be lower on the mortgage than the car but the mortgage will take a lot longer to pay back than the car loan.
If you have questions about refinancing, then contact TrueFi.
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