Scaling a mountain of debt can feel impossible — but refinancing your home with a Cash Out Refinance is an easy way to not only lower your payments, but efficiently consolidate your debt payments such as credit cards or auto loans. Interest rates on these loans are typically much higher than a mortgage rate, giving you the ability to save thousands over the course of payments. Talk to one of our mortgage specialists to find out how.
What is a cash out refinance?
A cash-out refinance is when you refinance your mortgage and the new loan is larger than your current mortgage. The difference is given to you in cash or used to pay off other high interest debts. A cash-out refinance is a great way to access the equity in your home and change your loan terms for additional savings.
Let’s say you have a home worth $350,000 and a mortgage of $200,000. You could do a cash-out refinance for a new mortgage of $300,000 and use the $100,000 difference as you wish. A majority of the time, this cash is used to pay off higher interest debts (credit cards, personal loans, student loans, etc). This restructuring of debts puts everything onto one payment and drastically reduces your overall cash flow. It’s frequent we see customers reduce their monthly payments by hundreds of dollars every month.
Reasons for cash out refinancing
The most popular reason for a cash-out refinance we see is to pay off higher interest credit cards. Consolidating your debts into one payment is a great way to free up additional cash flow and potentially increase your credit scores. The amount of cash you can access in your equity will depend on your credit score as well current guidelines. Before the mortgage crisis, it was very common for homeowners to access 100% of their equity. Now, it is limited to 80%-95%.