Cash-Out Refinancing

Cash-Out Refinancing

The average interest rate remains historically low and home owners may be interested in refinancing their

current mortgage or cash-out refinancing.

As you pay off your mortgage, you accrue more equity. As this builds up you can gain access to cash to use on

emergencies or other expenses. Cash-out refinancing is one way you can use your home as a tool to get money.

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How Does It Work?

Associated Perks

You will still have the same amount of equity, your new mortgage will just encompass the money you took to

use on other expenses. You continue to build your equity on top of the amount you had prior to applying

for cash-out refinancing.

In addition, many homeowners apply for cash-out refinancing to nab a lower interest rate. So while you

get access to cash, you also cut down the interest rate affixed to your new mortgage.

Using Your Cash

Investing Your Cash

Cash-out refinancing can be used to increase the value of your current home.

For example, if you plan on selling your property and feel that your kitchen is outdated, cash-out refinancing can provide you with the ability to pay for renovations

before putting your house on the market.

You can increase the value of your property and make a higher profit when you sell your home.

RequirementsZillow, an online real estate company, noted that

some fees apply to cash-out refinancing just as they would to conventional refinancing. These include: Closing costs, interest

on the cash received and interest on the mortgage amount

Some homeowners may not qualify for cash-out refinancing. Lenders want to ensure -• You have a credit score that is typically higher than what is

necessary for traditional refinancing. • You have built adequate equity which also lends to the loan-

to-value ratio being no more that 85 percent. • The home owner has resided in the home for at least a year.

Know Your Limits

According to Bankrate, many lenders will limit how much cash you can take out. Typically, they will

allow you to cash out a max of 80-90% of your built up equity. In some instances you can borrow more, but may be

required to purchase private mortgage insurance.

In addition, you should ensure that you know how much money you can afford to cash-out. If you take out money for

expenses that don't provide you with a return, such as a vacation, evaluate whether it is something you can

realistically afford down the road.

Take Careful Consideration

"People have a budget in mind and they will manage

to that budget versus saying, 'Give me as much

money as possible.’ It varies by the consumer and their personal situation, but they won't necessarily push the

outer boundaries of it.“- Kelly Kockos, Home Equity Product Manager for Wells

Fargo.

"Too often these loans have made our houses a bank account and made the equity very accessible,

which is not always a good thing. There is no reason to tap home equity unless you

absolutely have to.”- Alan Moore, Certified

Financial Planning Professional for Serenity

Financial Consulting

VS.

Deciding If It’s For You

By piecing together a clearer picture of what cash-out refinancing entails, you can make an educated decision

and feel more confident moving forward.

You will want to calculate whether the extra fees and expenses for refinancing are worth moving forward and

how you will ultimately use the money you decide to cash-out with.

Contact Your Loan Officer Today to Learn More About Cash-out

Refinancing!