Home Mortgage Blog
Cash-Out Refinance: What It Means & How It Works
For homeowners who have built equity in their homes, a cash-out refinance may be a useful tool to cover some of life’s big expenses. There are many reasons homeowners may be interested in a refinance of this nature. Whether the money is for debt consolidation, a renovation, college tuition, or a new business, this program allows homeowners to turn their equity into cash.
WHAT IS EQUITY?
Equity is the difference between a home’s value and the amount you owe on your mortgage. It is built as you pay down your mortgage, or if your home’s value has increased.
HOW DOES IT WORK?
With a cash-out refinance you can replace your current mortgage with a new loan for more than you currently owe. You then receive the difference in cash that can be spent as you see fit.
While a cash-out refinance is not for everyone, it can be especially beneficial if your current mortgage interest rate is higher than today’s market. If you can refinance at a lower interest rate, you could save thousands over the course of the loan. It can also help homeowners to borrow cash at a lower interest rate than other lending options such as credit cards or personal loans.
If you would like to learn more, contact one of our experienced Loan Officers today. We would be happy to walk you through your options and help you determine if a cash-out refinance is a good fit for you.