If you own a home and have equity in it, you might be able to access the equity to use it for other purposes. This means you can keep your home but use the money you already invested in it for things like debt payoff, home improvements, or paying for college.
A cash-out refinance allows you to tap into your home’s equity of up to 80% of the home’s value. You can use the funds however you want. Lenders don’t tell you what you can or cannot do with the money. As long as you make your mortgage payments on time, you get to keep your home and the funds withdrawn from your home’s equity.
A cash-out refinance uses your home as leverage or collateral, just like when you bought it. If the home’s value increased or you paid the loan amount down enough that you have equity in the home, you can borrow it again with a cash-out refinance.
A cash-out refinance is one loan, and it replaces your first mortgage. The difference between the borrowed loan amount and any mortgages you have to pay off is yours. You receive it in one lump sum and can use it how you want.
To qualify for a cash-out refinance, you’ll need good credit, a low debt-to-income ratio, and stable income. It also helps if you have a timely mortgage payment history and can prove that you could easily afford the lower loan amount. Since a cash-out refinance is for a higher amount, any positive factors you can show that you aren’t a high risk of default will work in your favor
Most lenders allow you to borrow up to 80% of the home’s value. This amount includes any outstanding loan balances. For example, if your home is worth $300,000, you can have a mortgage of up to $24,000. If your first mortgage already had a balance of $100,000, that leaves you with up to $140,000 free to use how you want
A cash-out refinance can be right for certain borrowers. As long as you are comfortable with a higher mortgage payment and you have use for the funds, it can be worth it. Just make sure you can afford the payment and aren’t just taking money out of your home because it’s there. Put the money to good use, like home improvements or debt payoff for the best results
If you need a cash-out refinance, Priva Mortgage is here for you every step of the way. We offer the most competitive interest rates, the lowest fees, and the highest quality customer service to ensure you understand what you’re getting.
Contact us today to learn more about how we can help you tap into your home’s equity and put it to good use!