Did you realize that your mortgage is not just a liablity, it is also a tool? A mortgage can be used as a medium for financing just about anything. Depending on the value of your home and the amount owed, you can refinance your home and get cash in hand.
How does this work you ask?
When you refinance your home the lender is not concerned with how much you currently owe on your home. The lender will simply allow you to borrow a given percentage of the value of your home. The difference between the amount you owe and the new loan amount can be received as a cash payment when your cash out refinance transaction is completed.
An Example of a No Fee / No Closing Cost Cash Out Refinance:
Home Value = $100,000
Current Morgage = $20,000
New Mortgage = $80,000
Cash to you = $60,000
This example is based on a no fee or no closing cost refinance. You may have a slightly higher interest rate but you will not have any costs to refinance your home.
This new cash out refinance would be based on an 80% Loan-to-Value (LTV). The lender may allow you to borrow as much as 100% LTV or as low as 50% LTV depending on your qualifications. (Credit Score, Credit History, Income, Assets and other factors)
How do I calculate Loan-to-Value?
Amount of Mortgage/Value of home = LTV %
It is important to do a refinance comparison of the different loan programs that you discuss with one of our mortgage specialists. If you do not plan to stay in your home for more than 3-7 years it will make sense to utilize a no cost refinance. The amount you save per year will not be enough to recover the costs of the refinance in such a short period of time. If you plan on staying in your home for 15 years or more it will make sense to pay closing costs and receive a slightly lower interest rate.
You can determine what will work best by utilizing our mortgage calculator, speaking with one of our mortgage specialists and by reviewing the mortgage amortization table that our agent can provide you with..
What can I use the cash out for?
You can use the cash proceeds from a cash out refinance for absolutely anything.
Home Improvements
Payoff Credit Card Debt
Payoff Auto Loans
Take a Vacation
Debt Consolidation
Payoff Personal Loans
Cash Reserves
The possibilities are endless. Many borrowers use a cash out refinance for cash flow purposes. When you payoff credit card debt or an auto loan that is currently at a 10% interest rate or higher, and you incorporate that debt into your mortgage at a 5.25% interest rate, you can save thousands of dollars a year in interest expenses.
These amounts will also be payable over a 30, 40, or even 50 year term which will dramatically lower your payments. This will allow you to have a much higher cash flow each month. Ask your mortgage professional if you qualify for a 30 year fixed mortgage, 40 year fixed mortgage, or 50 year fixed mortgage, or a no closing cost refinance if you will be in the house for a fairly short period of time.
If a cash out refinance is right for you, now it is time to do a comparison of the available loan programs and obtain advice, to find the best mortgage rate and lowest fees so that you can best answer the question, should I refinance?
