Did you know that typically over time your home builds value? That value is referred to as your home’s equity and it is the difference between the current value of your home and the amount outstanding on your mortgage. You may be able to take advantage of this equity to pay for major expenses with a cash-out refinance.
A cash-out refinance is a method for you to tap into your home equity. You’ll refinance your existing mortgage into a new one for a larger amount and pocket the difference, minus closing costs. But, remember that you’ll be using your home as collateral so be sure that your new payments are affordable. These loans can come with a slightly higher interest rate because the lender is taking on more risk with the higher loan amount.
Typically, cash-out refinance loan amounts are limited to 80% of your home’s value, but some mortgage programs can go higher. If you’ve built up a large amount of equity in your home and want to use it to meet some of your financial goals, a cash-out refinance can be a good option.
Can a Cash-Out Refinance Help with Major Expenses?
Paying for CollegePaying for college is no small feat. Refinancing your mortgage to help fund your child’s tuition is a popular option for its one-time cash return, but there may be some unexpected drawbacks too. (more…)