Buying and financing your home can be confusing. There are plenty of options for financing and refinancing a home purchase.
Once you're a homeowner and you've built some equity, there are many ways to refinance your home or use your home's equity to your financial advantage.
Have you heard of a cash-out mortgage? If you're looking for a way to lower your monthly mortgage payments, a cash-out mortgage is not the answer.
However, a cash-out refinance could be a good idea if you need cash for a home improvement renovation or to consolidate debt. Consolidating your debt via your homes equity often allows you to have a lower monthly outgo, than paying your debts individually. Here's your complete guide to everything you should know about a cash-out refinance.
You've probably heard of the idea of refinancing your home. When done the right way, a mortgage refinance can get you a lower interest rate and reduce your monthly payments.
In most cases, a home refinance should also reduce the overall amount you pay for your home when you make your final mortgage payment.
With a cash-out refinance, you add more money to your loan amount. In return, you get cashback to use in whatever way you need.
A cash-out refinance is a good decision for many homeowners, but it's not for everyone. We'll talk more about why people choose to refinance with a cash-out loan, and if it's right for you.
You might think a cash-out refinance is the same as a HELOC (Home Equity Line of Credit). While the idea of using your home's equity for funds is similar between the two, a cash-out refinance is not the same as a HELOC.
With a HELOC, you have a line of credit that's available as you need it. It's not a one-time lump sum of cash like a cash-out refinance mortgage.
HELOCs come with timeframes that limit how long you can draw cash. Since it's a line of credit, you repay the full amount that you draw as credit. HELOCs are also variable rate, just like your credit cards.
You don't repay the cash-out amount from your cash-out refinance. Instead, your monthly payment goes toward the principal and interest of the full loan amount.
A cash-out refinance is ideal for many things. Since it's cash, you can use it as you see fit.
Many people use this tool to:
Since a cash-out refinance uses your home as collateral, you want to be careful how you use your funds. Buying a new car or going on a shopping spree isn't a responsible way to use the cash funds provided by your new mortgage.
As mentioned above, a cash-out refinance isn't for everyone. There are plenty of pros to refinancing your home this way. There are also some cons to consider before applying for a cash-out refinance.
When you're approved for a cash-out refinance, you'll see some benefits beyond the cash payment.
When used the right way, your cash-out refinance can not only fund a renovation or help reduce your debt, you're likely to experience other financial benefits.
As with any financial decision, there are some points to consider before signing on the dotted line.
It's critical to understand your reasons for refinancing your home with a cash-out option before you go through the process of approval and ultimately close on a new mortgage. Your cashed-out amount isn't a new stash of spending money.
Use the funds to add value to your home or relieve overwhelming debt.
As with other loans, a cash-out refinance comes with criteria and other considerations. Not every homeowner qualifies for this type of refinance, and not every home is a good candidate for cash-out refinancing.
Be sure you do your research to know what to expect and the cash-out refinance rules.
Any type of mortgage is a big financial decision. When considering a cash-out refinance, factor in the details of the new loan along with the goals you have for this type of refinance.
Has it been a while since you applied for your last mortgage? That's ok! We're here to help you prepare for your loan refinance application process.
You'll need much of the same information you needed for the original loan, but make sure everything reflects your current financial situation.
Bring critical documents, including:
When meeting with your mortgage broker, ask plenty of questions. It's essential to understand everything about the cash-out refinance process before you finalize the new loan.
When choosing a cash-out refinance, use it wisely. It's an excellent option for improving your credit score, upgrading your home, or paying down high-interest or medical debt.
If you're not sure that a cash-out refinance mortgage is right for you, let us help! Contact us to see how we can help you find the right mortgage or refinancing solution for your Seattle area home.
Seattle's Mortgage Broker specializes in closing Washington home loans extremely quickly. We are out of the box thinkers and are often referred to as the 'golden ticket' when it comes to winning in multiple offer situations. We found our 15+ years of on time closings has built a solid reputation with listing agents and mortgage lenders, which helps us get our clients the best options every time.