Are you interested in leveraging your house to get a cash-out refinance? This is when you are allowed to borrow a percentage of what your home is worth and take the money out in cash. It will help to know these 5 things about using your home equity to borrow the money that you need.
Your Interest Rate Will Likely Increase
One of the reasons that people get a cash-out refinance is because their home has gone up in value and they want to borrow against that equity. However, be aware that borrowing more money means that you are viewed as a greater risk to your lender. It's possible that your lender will give you a higher interest rate than what you originally had on your home, simply due to you borrowing more money than you did for your original mortgage.
You Must First Pay Off All Liens and Judgements
Be aware that a lender is not going to let you get a cash-out to refinance until the title of the home is clear. This means that you must not have any liens or judgments against you with the property being used as collateral. While this may not be a problem for most people, it's a good thing to keep in mind if it does affect you.
Your Closing Costs Can Be Included in Your Refinance
When you first purchased your home, you had to pay for your closing costs before you could buy the home. Things are a bit different for a cash-out refinance since you can roll those closing costs into the refinance and gradually pay them off over time. This is great for people that do not have the cash on hand to cover the closing costs or are looking to have more money upfront when refinancing.
You Can Consolidate Debts with Your Refinance
A common reason that people get a cash-out refinance is to consolidate their debts. The interest rate that you pay on a home is likely much less than what you are paying on other loans. You are allowed to use the money from a cash-out refinance to pay off student loans, credit cards, auto loans, and things of that nature.
You Can Perform Home Improvements with Your Refinance
Many people finance their home improvements with cash-out real estate refinancing because it actually improves the value of their home even more. Just make sure that you do not overdo it with upgrades so that your home actually retains its high value when you eventually sell it.Share