What Is a Cash-Out Refinance?
A mortgage refinance loan allows you to replace your current mortgage loan with a new one. Many people refinance their mortgage loan to get a lower interest rate and monthly payment. But as the principal amount of your loan goes down and the value of your home appreciates, a cash-out refinance also allows you to tap some of the equity you’ve built. Due to the incredible increases in property values over the last 2 years there is a good chance you have equity in your home. We can connect you with a Licensed Loan Officer who can pre-flight the value of your home to give you an idea upfront.
For example, let’s say you currently have a $250,000 mortgage balance on a home worth $400,000. Many lenders will let you borrow up to 80% of the home’s value, so you could potentially refinance your loan for up to $320,000.
The difference between the new loan amount and the original loan balance is what you’d receive in cash. You can use that money for just about anything you want, including:
- Debt consolidation
- Home improvements
- Emergency expenses
- Retirement savings
- Education savings
- Other major expenses
Just because you own a home, though, it doesn’t mean you’re eligible for a cash-out refinance. For starters, you’ll need to have enough equity in your home to meet lender requirements—such as the 80% loan-to-value ratio.
