Is a Cash Out Refinance In Your Future?
Mortgage rates have remained below 4.00 percent for quite some time. In fact, according to Freddie Mac’s weekly mortgage rate survey, the last time the 30 year conforming rate was above 4.00 percent was November of last year. At the same time, property values have risen as well, providing additional equity to homeowners. This combination of low rates and higher property values can mean it might very well be an ideal time to lock in these low rates while at the same time pulling a little cash out during the process. Have you thought about a cash out refinance?
There are still millions of homeowners who could have benefited from lower rates but for whatever reason they couldn’t. Perhaps there wasn’t enough equity in the property or some other issue. If you’re one of those who have considered refinancing but weren’t quite sure if the time was right, it’s time to reconsider. Not only can you lower your monthly payment or shorten your loan term but taking cash out while refinancing can provide you with additional funds at a very low rate. If you can get a 15 year fixed rate below 3.50 percent and pull out some equity in the form of cash, where else can you borrow money at such a low rate?
A cash out refinance is a fairly simple process. You simply complete a mortgage loan application and submit it to your lender. Your loan amount will be enough to pay off your current balance, any associated closing costs plus the amount of cash you’d like to put in your pocket. When you go to your closing, there’s no need to bring a cashier’s check to escrow. Instead, the escrow agent will hand you a check for the amount you requested. You can borrow up to 75 percent of the current appraised value of your home and choose the ideal loan term of 10, 15, 20, 25 or 30 years.
If you think you’d like to explore this option further, it’s important to speak with your loan officer to first run the numbers. You’ll need to consider closing costs but there are ways to offset some or all of your costs with a simply rate adjustment, putting more cash in your pocket. A cash out refinance isn’t always the best option, but given sufficient equity and the math works out, you can use that cash for any purpose whatsoever while at the same time lowering your monthly payment.
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