What, When and Why You Would Use a Cash-Out Refinance

Refinancing
Loan Types
A cash-out refinance, it is important to know what it is, how it works and when you should consider a cash-out refinance.
Published on
July 16, 2024
Copy link
Introduction

A cash-out refinance is one of the ways you can use your home equity to get money. It is important to know what it is, how it works and when you should consider a cash out refinance.

What is a cash-out refinance?

A cash-out refinance is a type of mortgage loan that allows you to take out more money than the value of your home. You can use this extra cash for living expenses, such as paying off credit cards or improving your home.

You may be able to get a cash-out refinance if:

  • Your current loan isn't due for more than 10 years
  • You're current on all other payments and can pay off the remaining balance in full within 60 days
  • You have good credit (a FICO score above 640)
The purpose of a cash-out refinance loan

The purpose of a cash-out refinance loan is to get money from the equity in your home. A homeowner may choose to use this money for many purposes. They can use it for renovations or repairs on their home, for example, by paying off an existing mortgage and taking out a new one with more money. They could also use the money to pay off debts such as credit cards or student loans.

When you should consider a cash out refinance
  • You want to pay off your mortgage faster. This is the most obvious reason for a cash-out refinance. If you have a good credit score and can get a low interest rate, this could be an ideal way to pay down your loan.
  • You have a solid down payment: A good down payment will help you get approved for your new loan, so if you already have it, this can be another good reason to consider refinancing.
  • You want to buy or build a home: If you are planning on buying or building a new home, now may be the time when it makes financial sense for you. With lower interest rates and higher home values, now might be the best time for refinancing into your next home!
A cash out refinance is one of the ways to get money from your home equity. It will be helpful in certain situations but you need to work with a professional to see if it makes sense for your situation.

A cash out refinance is one of the ways to get money from your home equity. It will be helpful in certain situations but you need to work with a professional to see if it makes sense for your situation.

If you are looking to lower your monthly payment or just get some extra money, a cash-out refinance can help you do this by increasing the amount of the loan and taking some of that equity out for yourself.

Conclusion

We hope this article has helped you understand how cash-out refinances work and whether or not they are right for your situation. If you are considering a cash out refinance loan or have questions about the process, contact us today so we can help you find out more!

Get started today
Whether you're actively looking, or just researching, you can find out what you qualify for and get connected with a pro.
Apply Now
Get Expert Guidance on Mortgage Refinancing
Unlock Savings Now! Fill out the form with your contact information and get connected with a trusted mortgage professional.
Take the First Step!
Latest posts

Don't Stop Here

Check out some of these related articles.

Debt Service Coverage Ratio (DSCR): The Key Metric for Investment Loans

Learn about the Debt Service Coverage Ratio (DSCR), the key metric for investment loans. Understand how DSCR is calculated and its importance in evaluating the risk of an investment loan. Discover what is considered a good DSCR and how it can benefit borrowers. Find out tips to improve your DSCR and increase chances of loan approval. Explore a real-life case study showcasing DSCR in action. Calculate and improve your DSCR before applying for an investment loan.
Read post

What Are Buydown Loans?

Buydowns are a way to lower the interest rate on a home loan. They're also called interest-rate buydowns, mortgage buydowns, and discounted origination fees. You might call them "the best thing since sliced bread."
Read post

Beyond the Mortgage: Incorporating Relocation Costs into Your Budget

Moving can be an expensive endeavor, and it's important to consider all the costs involved when planning your budget. In this blog post, we go beyond the mortgage and explore the hidden costs of relocation. We break down the various expenses you may overlook and provide practical tips for budgeting and saving on relocation costs. Through a real-life case study, we illustrate how a family successfully incorporated relocation costs into their budget. Don't let unexpected expenses derail your move - learn how to plan ahead and save money on your relocation.
Read post