Buying a home is probably one of the biggest investments you’ll ever make, and you likely want to do everything in your power to make sure your home is as comfortable and up-to-date as possible. However, it can be tough to build up the needed savings to complete home renovations and repairs.
A cash-out refinance may be the answer you’re looking for. It can help you accomplish your home improvement goals so you don’t have to solely rely on credit cards, a personal loan or even a second mortgage. A cash-out refinance can also help you use the money you’ve already paid into your mortgage to do things like cover repair bills, consolidate to pay off debt or even eliminate your outstanding student loans.
As your mortgage matures, you gain equity in your home. Equity refers to the amount of a home’s value that you’ve actually paid off. You can gain equity in two ways:
- Your home increases in value.
- You pay down your mortgage principal through your monthly mortgage payments. Every time you make a monthly payment on your loan, you gain a bit more equity in your home.
A cash-out refinance is a type of mortgage refinance that takes advantage of the equity you’ve gained over time and gives you cash in exchange for taking on a larger mortgage. In other words, with a cash-out refinance, you borrow more than you owe on your mortgage and pocket the difference.
Unlike when you take out a second mortgage, a cash-out refinance doesn’t add another monthly payment to your list of bills – you pay off your old mortgage and replace it with your new mortgage.
When you refinance, you can do anything you want with the money you take from your equity. You can make repairs on your property, catch up on your student loan payments or cover an unexpected medical bill. Cash-out refinances also give you access to lower interest rates than credit cards.
Whether you want to pay down debt or renovate your kitchen, a cash-out refinance can be a powerful tool and can give you the money you need toward your goals. If you’re not sure if a refinance is right for you, speak with one of our Loan Officers for help. If you’re ready to get started, Prospect Home Finance can help you explore your options!