5 Benefits of Doing a Cash-Out Refinance
5 Benefits of Doing a Cash Out Refinance
Looking for some extra cash to pay off some debt or complete some projects that need to get done? We have compiled a list of benefits to see if one of these is a good idea for your situation.
- Pay Off Debts:
Paying off some accruing debt that has stacked up over time is a great way to get the most out of your equity through a cash out refinance. Also, paying off debts with higher balances can boost your credit score. Just be sure not to let the debt accrue again or it will not be beneficial to do this.
- Start a Business:
Consult with your Financial Advisor, but using the equity stored in the equity in your home can be a great way to get a business off the ground that you have been waiting to do. Just be cautious of the obvious dangers.
- Invest It!:
An interest bearing account would be a great way to store some equity that you have had in the house. Have your equity create another financial avenue for you while it accrues interest. This has a double benefit because you will still have this in case the market shifts, you can always apply this money back into the mortgage.
- Home Renovations:
Getting a Cash Out Refinance is a great way to start some of those home projects that you haven’t had the money to do (kitchen, bathroom, floor etc.) This type of loan has a lower interest rate than getting a Home Equity Line of Credit (HELOC). This type of loan also carries a lower interest rate than doing a second mortgage, in most cases.
- Set It Aside for Education:
Education is expensive and tuition always seems to be on the rise. Setting some cash aside for the kids to use for college can be a great way to have the house to yourselves once they graduate high school! Just kidding, but they will appreciate these funds once they realize how “real” student loans can be.
Completing a Cash Out Refinance will require an Appraisal. Be sure to check with your bank or lender to see if they feel there is enough Equity in the property to do this type of refinance. Typically, most lenders will allow up to between 80 – 85% Loan-to-Value Ratio. Remember, with conventional financing, anything over 80% LTV will require Private Mortgage Insurance (PMI). be sure to factor this in with your monthly expenses. As always, please consult with a Financial Advisor before partaking into any of these financial transactions.
In conclusion, these are just a few ways to use the equity that you have preserved in your house over the years to finally start working for you. If there was an easy way to invest everyone would do it, with a cash out refinance, this is no different. Treating a cash out refinance like an investment is the only way you should consider doing one. This is a financial decision that should be discussed with a Financial Advisor.
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