With all the fluctuation occurring with mortgage rates over the last few months you may find yourself thinking should I refinance now and can I still get a low rate? While no one is certain yet on the next rate hike, we do know one thing. Mortgage rates are still lower now than they were several years ago. It is still a good time to refinance.
With home values currently up nationwide, and sales 15.4 percent higher than a year ago, many homeowners choose not just to refinance but to do a cash-out refinance. What is a cash-out refinance and why would you do it? A cash-out refinance is when a homeowner chooses to refinance their current mortgage at an amount above what they currently owe to receive a distribution of money. In order to be able to receive money during a refinance you have to have built a certain amount of home equity. The cash-out amount will vary depending on the home’s current equity and market value.
Why consider a cash-out refinance?
Every homeowner’s situation is unique and the reasons for refinancing vary. You may want to consider a cash-out refinance for some of the following reasons:
- Consolidate debt
- Lower your mortgage interest rate and monthly payments
- Home improvement projects
- Down payment for an investment/vacation home
Lots of homeowners choose to do a cash-out refinance in order to consolidate their debt into one lump sum payment. While this is very convenient it should be done cautiously. If the debt you pay off is credit cards you could easily run the limits up again finding yourself in even more debt and ultimately impacting your credit score.
How about lowering your monthly mortgage payment by refinancing at a lower rate? Even a small percentage change of .5% from what you are paying now could save you thousands of dollars a year. Using a refinance calculator, you are able to see how different your mortgage payment could be at an alternate mortgage rate. Regardless, it is good practice to evaluate your mortgage each year to determine if it is still meeting your needs, financially.
Home improvement projects usually top the list of reasons to obtain a cash-out refinance. Why not use your home’s equity to help increase your home’s value? It may be difficult to quickly save enough money to remodel the kitchen or bathroom. Yet, these areas of the home are used heavily and have the most potential to add value when updated. Adding a separate loan just means another bill to pay each month. Why not roll it in with your monthly mortgage payment?
Are your annual family vacations to a repeat location? Thinking of investing in a second home there? You may be able to use the money from the cash out refinance as your down payment on the second home. No matter your reason for refinancing, be sure to turn to a lender you can trust, one who has a variety of loan options and understands both the mortgage industry and your personal needs.
Contemplation can bring questions
As you start to think about whether or not to refinance your home, you may find you have additional questions.
- Can I get a cash-out refinance on a rental property?
- Does it matter what kind of loan I have?
- How will a cash-out refinance affect my taxes?
- How long do I have to own my home before I can refinance?
While only you can decided whether or not a cash-out refinance is right for you, your lender can help answer questions you may have such as those above. However, any tax implications should be discussed with your tax advisor.
When does a cash-out refinance make sense? The best time to do a cash-out refinance is when it is best for you!
Do you think a cash-out refinance makes sense for you? If so, talk to the lending experts at Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.