As you start to make payments on your mortgage, you gain equity in your home. Equity refers to the amount of a home’s value that you have paid off. With a cash out refinance, you can take advantage of the equity you have built up over time and receive cash in exchange for a larger mortgage. With a cash out refinance, you borrow more than you own on your mortgage and pocket the difference.
Put your home’s equity to work for you and use a cash out refinance as a tool to achieve your financial goals, which may include:
The possibilities with a cash out refinance are endless! Let us tell you more about this type of refinance opportunity.
A cash out refinance takes the equity that you have built up over time and lets you “cash out” that equity in exchange for a larger mortgage. A cash out refinance does not add another monthly payment, it pays off your old mortgage and replaces it with a new mortgage.
After you have completed your cash out refinance, you can do anything you want with the money from your equity.
The amount of cash you can take out on your refinance will depend on your home’s current value. You will need to get your home appraised before you can find out how much you qualify for. The amount of cash you can get on a refinance will depend on the lender that you use and their qualifications. Most lenders let you take out up to 80% of your home’s value.
There are endless reasons to use a cash out refinance. This type of refinance can present many advantages over other loan types or a second mortgage. Here are some reasons why you should consider a cash out refinance:
Depending on your loan and your lender, you will most likely need to leave a certain amount of equity in your home and will not be able to cash out the entire amount.
A cash out refinance is based on an appraisal of your home. An appraisal will determine how much your lender is willing to give you.
The cash out refinance process is very similar to a traditional closing process, meaning that you will have to pay closing costs on your refinance. Common cash out refinancing closing costs include credit report fees, appraisal fees and attorney fees.
Before your lender can approve your refinance, you need to submit to underwriting and go through the appraisal process. This takes some time and will limit you from receiving the cash immediately.
When you go through the process of a cash out refinance, you will pay off your original mortgage and replace it with a new one. This means that your new loan may take longer to pay off, and your monthly mortgage payments may be different as well as your interest rate.
A cash out refinance is a type of mortgage refinance that takes advantage of the equity you have built over time and gives you cash in exchange for taking on a larger mortgage.
Yes. You can spend the cash on anything you want. A cash out refinance is a great way to pay for a home improvement project, debt consolidation or unexpected bills.
Because a cash out refinance is replacing your old mortgage with a new one, your monthly mortgage payments may change.
A cash out refinance can affect your credit score in two ways: replacement of old debt with new and the assumption of a new loan balance could increase your credit utilization ratio.
A cash out refinance may affect your property taxes if you are using the money to fund a remodel on your home.
Yes. Just like a traditional mortgage, a cash out refinance will also require a borrower to pay closing costs.
Expect to pay about 3-5% of your new loan amount during your closing. These fees include the appraisal fee to assess your home’s current value.
Subtract the amount you owe on your home by your home’s appraised value.
Most lenders allow you to borrow up to 80% of your home’s value.
No. The IRS does not view a cash out refinance as income; they view it as an additional loan. You do not need to include cash from your refinance on your annual taxes.
Learn more about the different types of loans and refinance options available and discover whether a Cash Out Refi is right for you by reading our blog article on the topic.
Depending on your financial goals, a cash out refinance may be a great option for you. Whether you want to complete some home improvement projects, pay down debt, or pay for college tuition, a cash out refinance can be a perfect tool to help you achieve your goals. Contact AnnieMac Home Mortgage today to get started.