Abilene Cash-Out Mortgage Refinance  

Refinancing your mortgage is something to consider a few years later, whether to avail of better mortgage terms or cash out some of the equity in your home.

But first, you need to understand what refinancing is and how the process works to determine if it is for you.

What is Refinancing? 

To refinance is to get a new mortgage replacing the old one. This gives you the freedom to modify key aspects of the loan, including the interest rate, the term of the loan, and the amount borrowed. Most homeowners refinance when they have substantial home equity when the property’s value exceeds the amount owed to the mortgage company.

A rate-and-term refinance only allows you to change your mortgage loan’s interest rate and length. With a cash-out refinance, you can withdraw a portion of your home’s equity in a lump sum and use the funds for whatever purpose.

The refinancing process is very similar to that of a mortgage. You must gather the necessary paperwork and submit it to your chosen lender for consideration.

What Are The Pros & Cons of a Cash-Out Refinance?

Whether for home improvements, debt repayment, or business purposes, a cash-out refinance can be an excellent way to keep the cash flow going. And while a cash-out refi comes with plenty of benefits, it also has several drawbacks. Here are the pros and cons of a cash-out refi.

Pros of Cash-Out Refinancing:

• Access part of the equity in cash: The most significant advantage of a cash-out refinance is having access to a substantial amount of money, which can be used to make home improvements or pay down debt.

• Consistent monthly payments: Cash-out refinances are typically offered with a 30-year fixed rate, which means you’ll pay the same amount for the life of the loan. Most home equity loans carry variable rather than fixed interest rates.

• Increase the value of your home: If you use your cash-out refi for home renovation, the improvements could boost your property’s value and further build your equity.

• Better than other forms of debt: Most consumers find mortgage debt as the cheapest form of available debt. Compared to credit cards, personal loans, and other forms of debt, mortgages have lower interest rates and more favorable terms.

Cons of Cash-Out Refinancing:

• Increase in total debt: A cash-out refinance will add to your existing debt. Despite how close you may have been to pay off your original mortgage, any additional cash you obtain will only serve to increase your current debt load. 

• Higher closing costs: When you refinance your mortgage, you will have to pay closing costs just like you did when you got your first mortgage. Credit checks, home appraisals, and other closing costs can add up to 2% to 4% of the loan amount, so be prepared.

• Requires plenty of equity: If you recently purchased your home with a low-down payment loan, you may not be eligible for a cash-out refinance because lenders typically require homeowners to keep at least 20% equity in their homes after refinancing.

• Potential tax implication: A cash-out refinance raises your mortgage debt, which may result in higher tax payments. It’s a good idea to consult with your accountant before applying.

Should you refinance?

If your home has gained considerable equity and you need the money for something that will improve your finances and your ability to repay the loan, a cash-out refinance could be a good option. Most homeowners put their loan money toward:

• Home Improvements

• Education Expenses

• Business Ventures

• Debt Consolidation

The financial benefits of a cash-out refinance loan are not without the potential for loss. Putting your home up for refinancing is a big decision that should not be made without first doing the necessary research or consulting an expert. 

Capital Home Mortgage is a direct Texas mortgage lender that offers attractive interest rates and terms on cash-out refinance loans. You can count on our experienced and knowledgeable loan officers to give you the advice and information you need to feel better about your loan decision. 

Contact us at (325) 387-8387 to learn more about our home loan and mortgage refinancing offers.