June 13, 2022
A cash-out refinance is a mortgage refinance that lets you convert your home equity into cash. A new mortgage is taken out in place of your current mortgage and the difference is paid to you in cash. Awesome, right?! How It Works: A cash-out refinance uses your home as collateral for a new loan and some cash, creating a new mortgage for a larger amount than you currently owe. This allows you to use the equity in your home to easily get some cash for emergencies, expenses, or something else you may want. Your Spirit Mortgage Loan Officer will work with you to secure the new loan. The steps are similar to when you bought your home: submit an application, documentation is sent to underwriting, get an approval and wait for your check. After the cash-out refinance process is complete the new mortgage pays off your current mortgage, and anything above the payoff amount is dispersed to you in cash. Things to Consider About a Cash-Out Refinance:- Creating a new mortgage loan will incur closing fees and will require an appraisal.
- Your mortgage interest rate will change—higher or lower depending on your current rate.
- The cash obtained from the refinance is tax-free cash.
- There are limits on how much you can borrow through a cash-out refinance – typically 80% of the available equity of your home.
- There are no restrictions on how you use the funds from a cash-out refinance.
- Consolidate Debt – You can use your cash to pay off other debts that hold a higher interest rate, such as credit cards or personal loans.
- Free Up Money for Investments – You can use your cash to make investments elsewhere to boost your retirement savings or build up a college fund.
- Make Home Renovations – Use the equity of your home to make those home improvements you’ve been talking about, like a new kitchen, updated HVAC or putting in a pool.