Get That Cash-Out!

Does a cash-out refinance make sense for you?  Equity is the difference between the value of your home and how much you owe on it.  For example, if your house will sell for $200,000 today, that is the value.  If you owe $160,000 on your current mortgage, you have $40,000 in equity ($200,000 minus $160,000).

As a homeowner, you have a couple of options to utilize equity in the proper situations.  In the previous example, you would not qualify for a cash-out refinance of your primary mortgage.  However, this is typically the ideal scenario.  You can typically go up to 80% Loan-to-Value for your primary mortgage.  If you owed $150,000 in that scenario, you can take cash-out of $30,000 depending on fees.  You would get a brand new mortgage.  Either this would reset you to a 30-year term or you can pay off sooner on a 15 year or find another term that fits your goals.  Every situation is different and rates along with your qualifications make a major impact.

What if you are exceeding 80% Loan-to-Value?  You still have options as long as you have equity.  However, you would be looking at a second mortgage.  This can create problems of its own but you can get a fixed term or a Home Equity Line of Credit (HELOC).  A HELOC is like a credit card using your house.  They’ll typically close out after 5 years but you’ll have options to extend pending your qualifications.

Why would someone get cash-out on their home?  You can use the equity to pay off debt.  Even if you increase your interest rate, you still might be better off if you’re paying down high interest credit cards or increasing cash-flow and getting rid of short-term installment loans.  You can conduct renovations on your home and hopefully increase your value.  Finally, some people will use the funds to invest.  Mortgages are cheap debt and you may be better off keeping the funds liquid while earning interest in an investment.  Every situation is different though for many, many reasons.  We can help navigate solutions for you and when they make the most sense.

If you have any questions or want more information, visit!

Jeremiah Claramunt


NMLS 33184