Are you thinking about making some changes to your home like adding on a room or fixing the roof? Or maybe you have found yourself in a difficult financial situation and could use a large lump money in a short period of time?
If you currently own a home with available equity, you can take out a cash loan for more than your current home loan to get the difference in cash. This new loan will pay the difference between the value of your current home and the mortgage balance. It will typically have a higher interest rate than your current home loan amount, and there is a limit to how much you can actually take out in a cash-out refinance.
Interest rates vary depending on the housing market so if you happen to have purchased when rates were higher overall, you might be able to get a lower interest rate even with a cash-out refinance.
Ways to Use a Cash Out Refinance
If you need cash in order to make home improvements a cash out refinance might be a good option for you. Home improvements will increase the value of the home so a cash-out refinance can be a good decision if you plan on selling a home in the future. This could help pay down the new loan and end up with some cash in your pocket.
Another way to use funds from a cash out refinance is to help pay off high interest credit cards or loans. It could save you money in the long run from paying interest on credit cards and you could use that money saved to invest back in the home or to pay off the new loan.
Since your debt will decrease, your credit score will increase and that will improve your financial situation overall. Increasing your credit score can help you a lot in the long run if you were to lose a job or have an emergency where you need to access a large amount of your credit immediately.
A cash-out refinance can sound like a great solution when you’re in need of cash, but there are risks involved that should be considered. The biggest reason a cash-out refinance could be risky is that if you cannot make the payments, you could lose your home due to foreclosure. You want to make sure you are able to make these payments and review your budget thoroughly so your home is not at risk.
Contact Us Today!
If you’re considering a cash-out refinance, we would love to help you answer any questions you may have to make the best decision for your situation. We want to make sure you are making the right decision for you, so please contact Commonwealth Mortgage Corp in Conroe, TX today!
Leave a Reply