Do you need extra cash flow to pay off major debts, repair your home, go to college, or make other upgrades to your house? At Stonebriar Mortgage, we help Dallas, Texas and California residents with various types of cash-out refinance options for their home. Cash-out refinance is used when people lend against the equity already built in their home. This week, we are here to tell you about various cash-out refinance options. Read on to learn more about why people might use them.
The Nuts and Bolts of Cash-Out Refinance
It is important to understand that completing a cash-out refinance means you will start a new loan. You will have to pay closing fees and may end up with very different loan terms than with your current mortgage. The current mortgage will not necessarily go away, either. However, if you have paid off more of your home and need extra cash flow, then this may be worth the cost. Do you need to make repairs you cannot afford or want to make another major investment in life? You can compare the costs of using a cash-out refinance instead of using other options to finance you needs.
Using a Cash-Out Refinance Loan
When you choose to use a cash-out refinance, make sure the benefits outweigh the costs. Look into other financing for your needs, such as student loans, debt restructuring, store financing, and other options. Interest rates may be lower or higher with the various choices. If you have a lot of high interest debt, then using a cash-out refinance loan may help you pay it off faster. In some cases, the interest on your new loan will be lower. However, you may be able to balance transfer your debt to a new credit card and this may cost less than a new home loan.
The Pitfalls of Using a Cash-Out Refinance Loan
As stated, there may be cheaper ways to finance your needs. For example, you may need to install upgrades or replace a major appliance in your home. It may be cheaper to look at in-store financing options. Some retailers offer 0% financing and credit cards that come with rewards programs. There are no closing costs associated with opening a new credit card, and usually no fees. In a cash-out refinance, fees are a certainty.
You will also take out equity that you had built in your home, essentially borrowing money you already paid, including interest. However, in some situations it makes the most sense to create cash flow from what you have already invested. For example, if you are using the funds to purchase a second home.
Stonebriar Mortgage is here to help homeowners in the California and Dallas, Texas markets consider a cash-out refinance. Contact our offices today!