How to Find the Best Lender for a Cash-Out Refinance

A cash out refinance loan allows a borrower to take advantage of the difference between the outstanding loan balance on a home and the equity in order to refinance the mortgage. Since the equity is higher than the amount of the loan’s balance, the homeowner can take the difference after paying off the old loan and use the proceeds for whatever purpose they have.

Cash Out Refinance Loans

A cash out refinance results in a new loan and debt obligation to the borrower and should be treated as debt by the borrower. This means that the new loan needs to be paid in order to avoid loan default and possible foreclosure of the home in order for the lender to retire the loan. A cash out refinance loan provides some benefits for the borrower and the lender used should give the borrower the best rate and conditions in order to make the loan beneficial to all parties.

Contact Existing Mortgage Lender

The best lender for a cash out refinance may be the original lender on the existing mortgage. Since the bank or lending institution understands the nature of the borrower and the terms and conditions of the existing loan, they are in the best position to meet the needs of the borrower by structuring a loan that allows them to take advantage of the equity and pay off the old debt obligation. The existing lender should be experienced in providing cash out refinance loans and offer terms and rates that are comparable to competitor rates offered in the market.

Compare Cash Out Refinance Loan Rates

A borrower should compare loan rates, terms and conditions among different lenders in order to receive the best cash out refinance offer. A borrower should compare at least 3 lenders rates and loan terms to determine which lender provides the best loan offer.  

Borrow What Can be Paid Back

A borrower should also consider the best money rates relative to the amount being borrowed and not borrow more money than what they can afford to pay back. This means looking past a lender who require a minimum loan amount in excess of what the borrower can afford to pay back, even though such a lender’s rates may be better. Taking on too much debt can create a problem in the future for the borrower or result in loss of the home due to foreclosure.

Beginning with the existing lender, a borrower can use referrals or the internet to find a suitable lender to discuss their situation and tailor a cash out refinance loan to meet their needs.