Many already have their own home, which can be quite a dream come true if you’ve always had an inkling for independence. However, somewhere down the line, you might be looking to add a second property to your assets, be it for business or personal purposes. If it isn’t another household, it might be a different change, such as a home improvement or addition.
The bad news is that you need a large amount of money to get or improve the current house that you already have. But, the good news is that options are available to get your hands on the cash you need for such expenses. For instance, a cash-out refinance is something to consider. Continue reading to learn more about this.
What Exactly Is a Cash-Out Refinance?
A cash-out refinance is a type of home refinancing where you refinance your current home loan to avail a large sum of cash. For instance, if you have $300,000 in your house with an existing mortgage at $250,000, you can apply for a $50,000 cash-out refinance loan.
In contrast to a cash-out loan, where you can get the full amount of your loan in cash, a cash-out refinance is just a partial amount. It is a fairly good option for homeowners if you’ve already lived in the home for quite some time, developing some equity.
When Is a Cash-Out Refinance Used?
If you have decided to sell a house, you will get cash from the proceeds of the sale. However, if you don’t want to go through the hassle of selling the home and buying another one, a cash-out refinance is a short-term option for you.
Another scenario where you can use a cash-out refinance is any time you need to lower your monthly payments. While this seems like a really good idea, keep in mind to have enough cash to actually pay the previous debt or your loan.
What Is a Cash-Out Refinance Used For?
As implied in the points above, you can use the money from a cash-out refinance as you please. You can even use it for home improvement projects or other purposes, such as financing another mortgage for another home.
You can also use a cash-out refinance to pay off debts and other expenses. If you’re looking to have a source of income, you can also invest the sum you receive to finance a business or pay for a course.
What Loan Products are Similar to a Refinance?
One important thing to consider is that a cash-out refinance is quite different from a home equity line of credit or HELOC. While the former is a mortgage loan, the latter is revolving credit.
The easiest way you can compare the two is by thinking of your home as an ATM. You can withdraw money in the form of a home equity loan or HELOC, but you can’t use these proceeds to pay the mortgage.
Your Mortgage Experts in Tempe and Beyond!
As you can see, there are many different options you can use if you’re looking to get cash in your hands. While you can use a cash-out refinance, you can also use a home equity loan or HELOC. The key is to choose the option that works best for you.
Need a refinance in Arizona? Mortgages by Misty in beautiful Tempe, AZ, offers all the right loan products so that you can move into your dream home with a flexible mortgage. Get in touch with an expert mortgage broker in Tempe or anywhere in Arizona today at (480) 618-5358.