Refinancing

Need Money From Your Home? Try A Cash-Out Refinance


As interest rates continue to rise, you might think that refinancing your mortgage loan no longer makes sense. You won’t be able to nab an interest rate low enough to make such a move worthwhile.

But there is another reason to consider a refinance: as a way to turn the equity in your home into cash—money that you can use for everything from paying off your credit cards to remodeling your kitchen to easing the challenge of paying for your children’s college education.

In a cash-out refinance, you replace your existing loan with a new one that is larger. You then take the difference as a lump-sum cash payout.

Say you owe $150,000 on your mortgage. If you refinance to a new loan worth $200,000, you take the extra $50,000 as a payment. You then pay back the $200,000 you borrowed with monthly payments, just as you would with any mortgage loan.

This, then, is a reason to refinance even if you can’t qualify for an interest rate that’s much lower than the one you have today. And if you can nab a lower rate? Then that’s even better.

Of course, for a cash-out refinance to work, you do need equity in your home. If you owe $150,000 on your mortgage and your home is now worth $220,000, you have $70,000 of equity. Theoretically, a lender could approve you for a new loan of $220,000, leaving you with the entire $70,000 as a lump-sum payment. Lenders, though, generally won’t allow you to refinance to a new loan that takes up all of your home’s equity.

If you want to learn more about cash-out refinances, give us a call. We’re happy to help you determine if such a move is right for you.

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