Understanding Basics and Benefits of Cash-Out Refinancing

Within the world of mortgage refinancing, there are several potential reasons for entering. Some do it because they’re struggling to pay their mortgage, while others may be ahead-of-schedule and looking to cash in, so to speak, on the equity they’ve built up – among other reasons.

At Primary Residential Mortgage, we’re here to help with any mortgage refinance you’re in search of, for a variety of potential reasons. Among the group looking to benefit from their own equity built up in a home, the cash-out refinance is a common method that can be beneficial in several ways. Let’s go over what a cash-out refinance is and how it works, plus whether it might be the right choice for you.

Cash-Out Refinance Basics

Essentially, a cash-out refinance can be defined as any mortgage refinancing situation where you are refinancing for more than you owe on the home. This means that not only does your refinanced mortgage cover the remainder of your payments, it also leaves you with extra cash at closing time.

As we’ve alluded to already, a cash-out refinance requires you to have equity built up in your home. The level of such equity will determine how much cash you can get on this type of refinance, and there may be limits here. It’s also worth noting that you might be paying more interest after a cash-out refinance, since you’ll be increasing the sum you owe.

Why It’s Done

There are several possible benefits of cash-out refinancing:

• Debt consolidation: If you have major outstanding debts, cash-out refinancing can be a great way to get an infusion of cash to pay this down.
• Home improvement: Many homeowners also choose cash-out refinancing to assist with major remodeling or renovation projects.
• Tax deductions: Relatedly, if you use a cash-out refinance for any kind of home improvement, you’re likely eligible for a deduction on your taxes.
• Lower interest rates: While interest rates may go up in some scenarios, they also may go down in others.
• Tuition: Another possible use of cash-out refinancing is to add to a college fund for a younger generation.

Areas to Consider

It’s important to take stock of the entire picture when considering a cash-out refinance. If your payments aren’t going to lower, for instance, you might not want to go this route. You also shouldn’t view a cash-out refinance as a “bailout” for debt or other financial needs – using these funds to help with debt should accompany increased financial responsibility moving forward.

For more on cash-out refinancing, or to learn about any of our mortgage lender services or our excellent mortgage rates available, speak to the staff at Primary Residential Mortgage in Fort Myers today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.