A cash out refinance can help you get through today. And get ready for tomorrow!
Life has its ups and downs. Sometimes just getting through today is a victory. Sometimes you have time to take a breath and plan for tomorrow. In both cases, the equity in your house can help!
Your home equity is the value of your house minus the amount you owe. Say your house is currently worth $250,000 and you owe $150,000 on your mortgages. That means you have $100,000 of home equity.
You can get money from your home’s equity with a cash out refinance. With a cash-out refinance, you replace your current mortgage with a new loan for a higher amount and get the difference in cash. For example, you could refinance the house we just mentioned and replace the old mortgage for $150,000 with a new mortgage for $200,000 plus $50,000 cash in hand.
What do people typically do with the money from a cash out refinance? Here are some examples.
Consolidate higher interest debts
Life happens and people can end up with medical debt, credit card debt, and other kinds of loan debt with high interest rates. When you can get a lower interest rate through your mortgage, financial professionals suggest thinking about a cash out refinance to consolidate higher interest rate debt. Remember you may need to pay new closing costs when you refinance.
Pay for college or home improvements
Many people get a cash out refinance to make investments in their futures. A college degree that improves your chances of professional success or renovations that increase the value of your house are two ways they do it.
Opportunity to save money down the road
Some cash out refinances may come with more benefits than just cash. When you refinance, you might change from an adjustable rate mortgage to a fixed rate mortgage and make your monthly payments more predictable. This is something people do when they plan to live in their house for a number of years.
You might also pay a lower interest rate when you refinance, which lowers your interest payments. Keep in mind that a cash out refinance increases the amount you own on your mortgage, which means you might pay more money on interest payments over the life of the loan even though you have a lower rate.
Our Loan Advisors will be happy to discuss refinancing choices that may be available to you through Freedom Mortgage. Call us today at 877-220-5533.