Cash-out refinance takes advantage of your home equity to help pay off debt, cover unexpected expenses
Sometimes life’s unexpected events—paying off a debt, making a large purchase or medical expenses—can put you in a financial bind. But if you are a qualified homeowner with significant equity in your home, you can use that cash (equity) from your home to help with these life situations. This type of loan is called cash-out refinancing. A cash-out refinance is when you receive a new loan for more money than you currently owe on your existing loan. You receive the difference in cash.
HomeTrust Bank mortgage experts can explain the advantages of a cash-out refinance and help you decide if it is right for your financial situation.
- Say your home is worth $200,000 and you owe $110,000, so you have $90,000 in equity. With cash-out refinancing you can receive some of that equity in cash. If you need, for instance, $30,000 for improvements to your kitchen, a cash-out refinance loan would payoff your existing loan of $110,000 and give to you the additional $30,000 for you to spend on your kitchen improvements. Subject to loan to value guidelines, you may even be able to include your closing costs in the new cash-out refinance loan.
Cash-out refinancing advantages
- You can use the equity to consolidate other debt and reduce monthly payments.
- You receive a lump sum payout at closing.
- When you can’t get other financing or the alternative financing has a higher rate than the cash-out refinance rate, this loan is a great option.
- Allows you to pay for improvements that add value to your home.
You may use the cash for whatever needs you have, but many people use it to pay down high-interest credit card debt. You may also be able to deduct these payments from your taxes, unlike credit card debt. Please consult your tax advisor for the tax advantages of any loan product.
Cash-out refinance loans are available in fixed or adjustable rates, and can be conventional loans or government guaranteed loans from FHA or VA.
All loans are subject to credit approval and other requirements. Let our mortgage experts help you get started on an application now!