Life is truly like a box of chocolates; you never really know what you’re going to get. And when it comes to your current and future financial needs, the same uncertainty applies. Fortunately, the place that affords your family with refuge from the elements could very well be the same one that provides you with shelter from financial storms.
It’s your very own home.
And, the diligent financial commitment you’ve shown to your current mortgage can be your saving grace during those storms in the form of a Cash Out Refinance or “Cash Out Refi.”
Different Ways to Access Equity
Not unlike home equity lines of credit (HELOCs) and home equity loans, a Cash Out Refi is a smart way of leveraging the equity you’ve accrued in your home. A Cash Out Refi replaces your current mortgage with one that includes the original loan balance, plus an amount of cash you’d like to withdraw. In short, that means you can refinance the existing loan for more than the current mortgage and take the remainder in cash.
Since equity is the difference between the current value of a property and the amount owed on the mortgage, the sum of money that can be borrowed depends on the amount of equity that's been built up in the home's value. To be eligible for a Cash Out Refi, it important to note that borrowers need at least 15-percent equity (varies by program) in the property, based on an appraisal. Mortgage insurance may be required.
In general, qualifying for a Cash Out Refi requires that you meet minimum FICO requirements for the new loan, plus have at least 15-percent equity (varies by program) in the property. An appraisal may also be required.
Hypothetically, if your home is worth $500,000 and you owe $300,000, then your home has $200,000 in equity. You could tap into that equity to cover any expenses you want.
You can also change the loan type! For instance, switch from a variable to fixed rate and take advantage of a consistent, predictably lower mortgage payment for the life of the loan.
What are the reasons for Getting a Cash Out Refi?
As previously mentioned, the extra funds garnered from a Cash Out Refi can be a lifesaver in times of need. It can also be the key to making many of your aspirations and dreams come true.
Sure, a Cash Out Refi can help you catch up on bills and come to the rescue in an emergency, but it can also be your ace in the hole if you’d like to invest, start a business, or take an extravagant world cruise on a luxury liner. The possibilities are only limited by the equity in your home.
A Cash Out Refinance could help you:
Make home improvements
Buy or pay off a car
Fund a vacation home or a rental property
Contribute to your children’s college tuition bills
Pay medical bills
Pay off high-interest credit card debt
Finance a wedding
Take a vacation
Build a home addition
Pay down student loans
Pay for elderly care
If you’re ready to make any of these moves, talk to a New American Funding Loan Officer today to find out all the Cash Out Refinance options available to you.