Want to get cash out of your home in a refinance? Here’s what you need to do to get a great mortgage deal…
This is a great time for refinancing homes in Seattle, WA. There are also many good reasons to choose a cash out refinance. As well as some not so great ones. Check out these tips for making the most of this opportunity, and to get a mortgage loan deal you’ll love.
Types Of Home Refinancing
There is more than one type of refinance. Each can have its own advantages.
The most common three types of refinancing classification are as follows.
Rate & Term Refinance
As the name suggests, this type of refinance is all about adjusting the interest rate and term of your Seattle home loan.
You won’t be taking cash out, but you can lower your interest rate, total interest paid, and monthly payment. You may also adjust the length of your loan term. It can be a tool for eliminating PMI and getting away from a lender who hasn’t been treating you great as well.
Or you may choose this type of refinance to switch between a fixed rate and adjustable rate mortgage (ARM) too.
Debt Consolidation Refinance
A debt consolidation refinance means that in addition to being able to adjust your rate and terms, you can utilize your home equity to pay off other debts and consolidate them.
For example, if you can get a 3% mortgage loan, and can pay off your high rate 24% credit cards, car loans and other debt, you can dramatically lower how much interest you are paying. You can enjoy much lower overall monthly payments, while restoring your credit score, and freeing up your credit.
With this type of refinance, you don’t physically take out cash. It gets paid to your other creditors, like a balance transfer. The great upside of this, is that these refinances can come with slightly better rates than a full cash out refinance. In some cases you may be able to take out a limited amount of cash. Often up to 2% of the loan amount.
Cash Out Refinance
A cash out refinancing allows you to do all of the above, while also receiving a large lump sum of cash from the proceeds of the loan. You can use this cash for anything you like.
Home refinancing also presents the choice of various loan programs to choose from. Like FHA, VA, USDA and conventional loans. Your Seattle mortgage broker can help you pick the best fitting program.
Why Now Is A Great Time To Refinance Your Home
The ideal time to refinance your home in Seattle really comes down to your unique situation. Your financial situation, ability to document that, your particular home, and your goals.
Though generally speaking, this is one of the best times that we’ve seen in history for mortgage refinancing, and especially for those seeking a cash out refinancing in Washington State.
The first big reason for this is mortgage rates. Mortgage rates continue to be at incredible historic lows. You don’t want to miss out on what could be a once in a lifetime opportunity to lock in low rates.
Secondly, home values have shot up dramatically. That means many Seattle homeowners have incredible amounts of equity in their homes. That provides the room to get a substantial amount of cash out, and still qualify for the best rates and terms.
Equally important is that banks and Seattle mortgage lenders are reporting they are in a very strong financial position and are eager to grow their lending businesses. That means they also want to make as many good loans as possible.
Good vs. Bad Reasons To Cash Out Refinance
While your cash out is entirely yours and you have full control over how you spend it, there can be some reasons for cashing out that may be wiser than others.
Good Reasons To Cash Out Refinance Include:
- Lowering overall interest on credit and payments
- Improving your credit
- Investing in higher return investments
- Investing in home improvements which will extend the life and value of your home
- Covering emergency expenses, like medical bills
- Preserving the equity and wealth gain you’ve accumulated
Not So Great Reasons To Cash Out Refinance May Include:
- Frivolous shopping sprees
- Paying for a vacation
- Freeing up credit cards, only to max them out again
Tips For Your Cash Out Refinance
1. Decide How Much Cash You Really Need
How much cash do you actually need, and does it make sense to take out, versus the payments and debt you will take on? It is wise to consider this first, so that you are not carried away by emotions, and take out far more cash than you need.
2. Compare Loans By APR, NOT Advertised Interest Rate
Mortgage loans are still confusing. Total financing costs are a combination of fees and interest. Some will advertise really low rates to lure borrowers in, and then hit them with big fees.
The best, easiest and fastest way to compare mortgage deals is to look at the APR. This is the combination of these costs. It will instantly reveal which loan really gives you the best rate deal.
3. Know The Top Factors Influencing Your Loan Deal & Approval
- Your credit
- Income and debt to income ratio (DTI)
- The loan to value (LTV) and amount of equity
- The property; type and condition
4. Get Your Documents Together
Get all of your documents together early so that you know what you can provide and verify to lenders and not. For example; paystubs, bank statements, W2s, tax returns, etc.
5. Choose A Great Seattle Mortgage Broker
Ultimately, how smoothly your cash out refinance goes, and how happy you are with your loan deal will all come down to picking a good Seattle mortgage broker.
Start the process with this step, and everything else will be much easier.