Have you been thinking of refinancing your mortgage but are still waiting to see if rates will drop even further?
Rates are still very low but the consensus is the Fed will raise rates sooner rather than later.
It might be time to refinance your note and it also might be time to pull out a little cash in the process. Pulling out equity in the form of cash is what the industry calls a “cash out” refinance and allows you to put some money in your pocket while refinancing your existing mortgage. Borrowers typically refinance for three different reasons—lower the rate, adjust the loan term or change from a fixed to a hybrid or a hybrid to a fixed. During that process, you can also pull out cash to do with whatever you wish.
Want to pay off your credit card debt or your automobile loan? Compare your monthly payments on your credit balances and installment loans with your new mortgage payment. Let’s say you’re refinancing a $300,000 mortgage but you also want to pay off your automobile loan. The car loan is $25,000 and your monthly payment is $575. If you borrowed $325,000 and paid off your car, your mortgage payment goes up about $100 each month with a 4.00% 30 year rate but you eliminated the $575 car loan payment.
What about a kitchen remodel? Want to add a deck and begin enjoying your backyard again? Swimming pool perhaps? With a cash out refinance, you can not only take advantage of today’s rates but also take care of any home improvements you’ve been thinking about. Still others use their home equity to take care of some college bills or even open up a college fund.
The point is this—you can use your cash out funds for anything you want, and the interest rates on a cash out loan are much lower than putting something on a credit card or an installment loan. If you’ve been thinking of refinancing, don’t forget you can also tap into some of that equity as well. Talk it over with your loan officer and see how a cash out refinance might be in your future.
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