July 26, 2021
Right now, moving may be a little challenging as property value has gone up tremendously and the number of homes on the market is low. The next best option is to remodel and expand your home office, home gym, or add a patio for outdoor gatherings.
If you own your home and have a mortgage, a cash-out refinancing option may be an easy way to have the money to tackle your home improvement project. Since interest rates are still quite low now may be a good time to tap into your home’s equity.
Many homeowners may not realize that cash-out refinancing can help fund these projects. A cash-out refinance is not a second mortgage. It is borrowing against the equity in your home or money you have already paid towards your mortgage. A cash-out refinance will require that you refinance your home most likely at a lower rate.
The new loan amount will be slightly more than the remaining balance of your home because it will include the amount of cash you take out for you or your family. Cash-out refinancing is beneficial because it can increase monthly cash flow and allow you to make good use of the funds you take out, according to Freedom Mortgage, one of the nation’s full-service mortgage lending companies and a leader in FHA and VA loans according to Inside Mortgage Finance, 2020.
The benefits of cash-out refinancing aren’t limited to home improvements. Funds from a cash-out refinancing also can be used to pay for a college education or to consolidate high-interest debts at a lower interest rate. Homeowners can typically borrow up to 80% of the value of their homes without paying the private mortgage insurance (PMI) required by some lending situations. That means if you have more than 20% equity in your home, you can use that equity to get cash now.
To help homeowners explore their options and determine how much cash they can obtain, Freedom Mortgage offers a free cash-out refinancing calculator that enables the user to determine what makes sense and the amount of their new monthly payment.