Cash-out refinance mortgages are used by homeowners and investors to tap into their home equity when renovating, purchasing a second home, consolidating debt, or to accomplish numerous other financial strategies, according to a PR Newswire press release. So, we’re not surprised that Tampa and three other Florida locales rank among the top 25 cities for cash-out refinance mortgages.
Why Cash-Out Refinancing is Growing in Popularity
In Tampa and other cities throughout the U.S., the equity in homes has been increasing thanks to rising home prices. This is important because, according to Lending Tree, “In such an environment, borrowers who have had meaningful appreciation in their homes can still access the equity in their homes via a cash-out refinance, in which the new mortgage balance is higher than the outstanding balance prior to refinancing. This change in the mix of refinances — where more borrowers are interested in extracting home equity versus refinancing into a lower interest rate loan — leads to an increase in the share of cash-out loans as a proportion of total refinances.”
According to Lending Tree’s data, cash-out refinance loans rose 62% in the first quarter of 2018, when looking at mortgage requests and offers to refinance from borrowers between March 1, 2017 and March 1, 2018. Then, the cities were ranked, with Cape Coral, Florida coming in second place overall with 72% of refinanced mortgages utilizing a cash-out method.
Tampa, Florida came in 22nd place with 66% of refinance mortgages utilizing a cash-out method with an average loan amount of $189,385.
One interesting statistic Lending Tree points out is “that there were no regional trends we could identify among the cities with the most cash-out refinance borrowers, though loan amounts clearly line up with cities that have the highest home values, as would be expected. Opportunities for cash-out can result from long housing tenure or rapid price appreciation, or a combination of the two.”
What is Cash-Out Refinancing?
Cash-out refinancing is accomplished by refinancing your home mortgage and taking some of the equity out in the form of cash. The cash-out amount will differ for each home, but you can get a basic estimate by determining the different between 80% of your property value and the outstanding mortgage principle.
So, what does this look like?
For example, if you owe $60,000 on a home that is worth $200,000, and refinance the property with a fixed-rate mortgage for 80% of the value ($160,000), you may be able to take $100,000 cash out of your home. This can be beneficial for some homeowners, because they are pulling equity from their home in the form of cash, and in some cases refinancing at a lower interest rate.
Furthermore, real estate investors use cash-out refinancing to extract equity from a property in the form of cash without paying taxes.
Marimark Mortgage serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients with HARP refinancing to lower their monthly mortgage payments.