Benefits of a Cash-Out Refinance

A cash out refinance is a financial transaction in which a homeowner can use their existing mortgage to borrow money. That is, you increase the loan amount to pay off the debt of your mortgage plus add the amount that you would like to have in hand.  For example, if you owe $100,000.00 on your mortgage and you want to take out $50,000.00, your new loan amount would be $150,000.00.  The homeowner can either open up a home equity line of credit (or HELOC), or refinance an existing home mortgage. Below you will find a few benefits.

Consolidate Debt With Cash Out Refinance

When credit card balances, medical expenses, educational loans, IRS back taxes, or other financial obligations become a large burden a debt consolidation loan or cash out refinance may be the right solution. With cash-out refinances a homeowner will get the funds they need to pay off their financial obligations and roll it into the monthly mortgage payment.  The payment becomes one monthly payment instead of multiple payments.

Cash To Spend As You Need

A cash-out refinance or HELOC loan allows a homeowner to also take cash out of your property's equity and spend for repairs to property or most any other purpose.  A homeowner can receive a lump sum amount to allocate as necessary.  With a HELOC loan, a homeowner can either take one lump sum or as little as necessary.  A lender will provide the homeowner with a credit charge against their credit line.  The credit card limit will be their loan amount and a borrower is expected to pay the minimum monthly payment.  HELOC loans work are a little differently because their rates tend to be a little higher and the rates tend to be Adjustable rates. 

Better Mortgage Rates And Terms

It may also be possible to refinance and obtain improved mortgage terms.  In addition to taking cash out of their property, it is possible for a homeowner to renegotiate their terms and subsequently lower their interest rate.  Additionally, many homeowners have improved their credit ratings and are able to access lower rates and fees because of their credit. As an added bonus,  a borrower may be able to not only get cash-out, but also build a better loan with a low interest rate and more favorable terms and conditions.