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What Is A Cash-Out Refinance?

In need of some quick cash, but not interested in talking with your bank? Let’s talk about ways you can borrow from your home instead of the bank then!! You might have heard of the term cash-out refinance a lot lately, don’t worry! We’re here to break it down for you. After all, it’s always good to know your options and how they would typically work.

Ultimately, once you take out the equity that your home has accumulated, the choice is yours when it comes to what you want to do with the funds. Not quite sure what home equity is? Be sure to check out this blog to get a better understanding.

Here’s a list of how homeowners tap into their hard earned equity:

  • Consolidate debt

  • Down payment for a new home including investment properties 

  • Home Renovations

  • Replenish Savings 

Let’s talk numbers! Say your home’s current market value is $400,000 and your current mortgage balance is $200,000. Typically most lenders will let you cash out 80% of the value of your home. For instance, If you’d like to take out $50,000 for a kitchen remodel, your new mortgage with the cash-out refinance would be $250,000 plus any closing costs that you may incur with the refinance. In this example you would still have additional equity that you could either pull out of this refinance and hold for any additional uses later on. Lastly, there is no limit on how many cash-out refinances you do, as long as there is a benefit and the equity is there to take out. You might have also heard of the term home equity line of credit (HELOC) and they are not the same. We will cover this topic in another blog. 

Just a reminder: like all mortgages, there are closing costs that you can incur. It is very common when you refinance to also roll the closing costs into the loan. A licensed loan officer is the best person to review different scenarios with you.

Interested in a home refinance? Let’s talk! All it takes is 60 seconds to get started using our no-obligation home qualifier tool on the form on the right, or give us a call at (407) 330-7566.

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