Cash-out refinancing can provide borrowers with several important benefits, though it’s not the best option for all homeowners.
What Is Cash-Out Refinancing?
When you refinance your home mortgage, you can select whether to pull equity out of your home in the form of cash.
To get an idea of the amount of cash you could get from cash-out refinancing, determine how much equity you have in your property (difference between your property value and the outstanding mortgage principal). Keep in mind that most lenders will not allow you to access all of the equity, so you will need to contact a mortgage loan originator for details.
The Benefits of Cash-Out Refinancing
If you decide to apply for a cash-out refinance loan, you may be able to walk away from the closing with a substantial amount of money, depending on the amount of equity you have in your home. This is money you may use for any purpose, including home improvements, paying off credit cards, sending the kids to college, etc.
In addition, you may enjoy other benefits from refinancing, such as lowering your interest rate and mortgage payment, and adjusting your loan term to meet long-term goals.
When might Cash-Out Refinancing Not Be Advisable?
A cash-out refinance loan can be beneficial, but there are instances when it is not the best solution. The loan will increase the principal amount of your mortgage, and can also change the payoff date and total interest charges.
These changes may make cash-out refinancing less advantageous in some cases, so you should carefully consider the full impact of refinancing before moving forward.
More Resources
These articles about refinancing may also be helpful to you:
- FHA Cash-Out Refinance
- How To Refinance Your Home Mortgage
- FHA Streamline Refinance Home Mortgage
- FHA Refinance | FHA Streamline Refinance, FHA Cash-Out Refinance
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