You don’t have to sell your home to walk away from a closing with money in hand—cash-out refinancing is one way to liquidate the equity in your home and provide you with some needed cash.
If you’re thinking about cash out refinancing, here are five things you should keep in mind before moving forward:
Cash-out refinancing can be used for many different purposes.
Maybe you want to remodel your home. Or perhaps you’d like to go back to school and get your degree, pay off credit cards or existing student loans, or put money into a fund for retirement. One of the benefits of cash-out refinancing is that it can be used for whatever you want. (Pro Tip: When cashing out equity when you refinance, be sure to go with a loan term on your new mortgage that is equal to or less than the number of years you had left to pay on your old loan. This way, you’ll get the benefit of cashing out while still owning your home outright in a reasonable amount of time.)
You’ll probably pay closing costs.
Like most other refinance options, there may be fees associated with cash out refinancing. These include certain financing and closing costs. However, you may have the option of rolling the fees into the loan, eliminating upfront costs. Additionally, when you obtain cash our refinancing, you may have the option to skip one or two monthly mortgage payments and/or get a refund from your escrow account, which can be great sources for closing costs.
Cash out refinancing isn’t just for conventional loans.
The FHA, VA, and USDA loan programs also offer cash-out refinancing. Unlike the streamline refinance, however, a FHA cash-out refinance requires more documentation and verification than a streamline refinance. The credit and loan-to-income requirements are still more lenient than with a conventional cash-out refinance.
You can pay off judgments, collections, and liens with cash out refinancing.
If you have a judgment, collection account, or tax lien against your property, you may still be eligible for a cash-out refinancing if the money is used to pay off a judgment or lien. In some cases, the lender may make a direct payment to the creditor if it is an underwriting contingency.
Most properties are eligible for cash out refinancing.
Vacation homes, investment properties, second homes, manufactured homes, and condos are all eligible for a conventional cash out refinancing. In fact, property investors often use the cash they get from a cash out refinance for a down payment on additional investment properties as part of their investment strategy.
Refinancing your home can do more than just give you a lower interest rate. If you’d like to tap into your home’s equity and take advantage of lower rates, call one of NLC Loans’ personal mortgage advisors toll-free today at 1-877-480-8050.