If you are a homeowner thinking about completing significant home renovations this year, you’ll need some extra cash.
The great news for homeowners who still have a mortgage is that you may qualify for cash-out refinancing. Which would help you leverage some of the equity in your home to cover renovation costs.
In today’s blog post we’ll explore the topic of cash-out refinancing and how this unique financial product can help you increase your properties value.
What is Cash-Out Refinancing?
A cash-out refinance is unlike it’s counterpart the rate and term refinancing. Instead of negotiating for lower interest rates and a shorter repayment term, you refinancing your mortgage, to get the remaining amount in cash.
For example, after paying your mortgage over several years you could owe $100,000 on a $200,000 mortgage. Once your home has been re-appraised and the current market value is determined you can then use any extra the bank refinances (over and above what you owe) to complete renovations.
You don’t only have to use a cash-out refinance for renovations, what you do with the money is up to you. But, if you’re trading in the equity of your home the smart choice is to use the money to further increase the value of your home.
Should You Consider A Cash-Out Refinance
Cash-out refinancing when used correctly can be quite beneficial. You could pay for college tuition, or remodel your home, or take on projects that are out of your reach financially.
Keep in mind, though, that when you’re refinancing the terms of your mortgage may change. You may be extending the length of your mortgage, or getting a different interest rate. The process is quite similar to how you would’ve gotten your current mortgage. It’s not a matter of walking in and signing paperwork, your home will need to be appraised. That way the bank knows your LTV rate and how much they can lend you. You may not even get that much cash, but you may get new favorable repayment terms.
Equity in your home is meant to benefit you, otherwise it isn’t worth much. Using a cash-out refinance you’ll be able to get cash to complete other large projects you may not have been afforded.