What is a Cash-Out Refinance and How Can it Help You?

What is a Cash-Out Refinance?

How does a Cash-Out Refinance work?

  • You may be paying more interest because you are going to owe more money than you do currently.
  • There may be a limit on how much cash you can really get with a cash-out refinance loan (and you will not be able to get cash for all of the equity you have built up)

Reasons to Get a Cash-Out Refinance

  • Lower interest rates: You may be able to get a lower interest rate on your mortgage than you are currently paying. Even a partial percent can bring down your monthly payment (or allow you to pay it off sooner).
  • Debt consolidation: Many homeowners struggling with high-interest credit card debt opt for a cash-out refinance to help them get ahead of their finances. They can pay off all of their credit cards and only have one monthly payment to worry about.
  • Home improvement projects and repairs: After living in a home for so many years, many homeowners use these types of refinances to make some changes to their homes. Whether your bathroom has some major plumbing problems or you want to redo your kitchen, a cash-out refinance may be the best option to get this completed.
  • Tax deductions: You may be eligible for a mortgage interest deduction on your taxes if you use the cash to improve your home in any way.
  • New vehicle: You could use a cash-out refinance loan to buy a vehicle. You might get a better deal than if you had to get a loan specifically for your vehicle.
  • Tuition. Whether you or your child are thinking about college, you may be able to use your home equity to help.

Is it a good idea to Cash-Out Refinance?

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Elijah Agor, an advocate for vulnerable adults, writer, and a chocolate chip cookie connoisseur.

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Elijah Agor

Elijah Agor

Elijah Agor, an advocate for vulnerable adults, writer, and a chocolate chip cookie connoisseur.

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