Waco Cash-Out Refinance Loans

In real estate, refinancing is a typical process for replacing an existing mortgage with a new one that typically extends more favorable terms to the borrower. Refinancing a mortgage allows you to lower your interest rate, extend or reduce your mortgage term, eliminate or add borrowers, and, in the case of a cash-out refinance, get access to cash from the equity in your home.

What Is a Cash-Out Refinance: What It Is and How It Works

A cash-out refinance is a type of mortgage refinancing that allows you to turn your home equity into cash. With your home as collateral, you create a new mortgage for a more significant amount than what is owed, and the difference is paid to you in cash. A cash-out refinance is an easy way to get funds for emergencies, expenses, and wants.

A cash-out refinance will better serve your needs if you need funds to pay for big expenses such as medical fees, college tuition, or debt consolidation. But as it also reduces your home’s equity, a cash-out refinance loan typically has higher closing costs, fees, and interest rates than a standard refinance. Specialty mortgages, such as the U.S. Department of Veterans Affairs (VA) cash-out loans, can often be refinanced with better terms and lower fees and rates than regular mortgages.

Rate-and-Term vs. Cash-Out Refinance

As previously stated, borrowers have several refinancing options. Rate-and-term refinancing, also called “no cash-out” refinancing, is the simplest way to refinance a mortgage loan. With rate-and-term refinancing, you may obtain a lower interest rate or adjust the term of your loan, but your mortgage generally remains unchanged. Nothing else changes, just the rate and term.

Cash-out refinancing, on the other hand, has a different purpose. The difference between the two loans is paid to you in tax-free cash at closing, which is generally 45 to 60 days from when you apply. This is possible because you only owe the lending institution the difference between the original mortgage amount and the remaining balance.

Is a Cash-Out Refinance Right For You?

Waco homeowners can benefit from taking out a second mortgage for extra cash. Because your home is used as collateral, lenders don’t have to take on much risk and can keep interest rates low. That said, cash-out refinancing is one of the least expensive ways to pay for big expenses. Most homeowners use the proceeds to pay for the following:

• Home improvement projects Homeowners who use a cash-out refinance for home improvements may be able to deduct the mortgage interest from their taxes.
• Investment purposes: Proceeds of the loan can be used as retirement savings or to purchase investment properties.
• High-interest debt consolidation: Refinance rates are usually lower than other types of debt, like credit cards, which makes them a viable option for paying off high-interest debt.
• College education: Using your home’s equity to pay for your child’s college education can make sense if the refinance rate is much lower than the rate for a student loan.

Refinancing can help you pay off debt, remodel your kitchen, or invest for retirement. If you’re ready, explore your refinance options with Capital Home Mortgage today!