Cash out Refinance – Things to Know about Refinancing Your Mortgage to Get Cash Out

While there are costs associated with a cash-out mortgage, you should also remember the benefits.

A cash-out mortgage allows you to refinance your mortgage and pull out part of your equity. Before deciding how much to cash to use, be aware of the impact of PMI and equity amounts. However, you may find the benefits of refinancing outweigh the costs.

Cash-Out Mortgage Basics

With a cash-out mortgage, you can refinance for lower rates or to just get part of your equity out. Once the refinancing process is completed, you will end up with a check. You can decide to take up to 85% of your home’s equity in some cases. However, cashing-out a large percent of your home’s value will impact your refinancing rate and might require you to carry private mortgage insurance.

Higher Rates

You may also find yourself paying higher interest rates, at least a quarter percent, for cashing out over 75% of your home’s value. Lenders charge higher rates because there is an increased risk level. Your credit history will also be a factor in the type of financial package you qualify for.

Benefits of Cashing-Out

While there are costs associated with a cash-out mortgage, you should also remember the benefits. You can write off the interest on your taxes (ask your accountant) and you qualify for lower rates than with other types of credit. You can also spread out your payments over a longer period, lessening the monthly financial burden.

Taking out more than 75% of your home’s equity is not necessarily a bad decision. You just need to weigh the financial costs. You may find that in the long-run, tapping into your home equity is better than the other types of credit available to you. You may also discover that the tax benefits offset the slightly higher costs.

Author: Lester Bleich, NYS Licensed MLO, NMLS #152252

My name is Lester Bleich. I am a New York State Licensed Mortgage Loan Originator, NMLS #152252. As a mortgage finance specialist since 1987, I have been privileged to have helped well over 1000 homeowners with their home mortgage financing.

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