If you are a homeowner, there’s no time like the present to consider a cash-out refinance. With market values at an all-time high and interest rates still near record lows, you can tap into the wealth you’re already sitting on!
Some of you may be asking “What is a cash-out refinance?”
A cash-out refinance is a mortgage option that allows you to use the equity in your home to take out a larger mortgage. The equity in your home is determined by taking the difference between the current value of your home and how much you owe on your existing mortgage. That difference, minus closing costs including prepaids and escrows, is what you can take home at the end of the day in cash. The good news is you can finance all of your closing costs, so you will have no out of pocket costs to close the loan!
Cash out refinances can help accomplish a variety of goals. Home improvement and debt consolidation are the top two reasons homeowners pursue cash-out refinances. With the average credit card interest rate for 2022 ranging from 14.54% to 18.26%, pulling cash out of your home is a great way to consolidate that high interest rate debt at a lower interest rate. Plus, you can have up to two months with no mortgage payments!
An appraisal may be required to validate the market value, and keep in mind that the maximum amount of cash you can pull out with a conventional mortgage on a primary residence is 80% of the market value. For example, if your house appraises at $450,000, the maximum amount of your new mortgage is $360,000.