With mortgage rates at their lowest, now might be the best time to consider cash-out refinancing. A cash-out refinance loan is a mortgage refinance loan that allows users to take out cash by tapping into the total equity they have built up in their real estate. There are various advantages of borrowing against the value of your real estate, including the possibility of deducting the interest on your taxes, a lower interest rate than several other kinds of debt, and freeing up the money you have invested in a non-liquid asset. However, keeping a few essential tips in mind, you can quickly get the best terms for your cash-out refinance loan. Let’s look at a few of these tips:
Don’t Drain Too Much Equity
The primary purpose of cash-out refinancing is to access money using the equity of your property, but taking too much might put you at risk. After all, no one wants to end up owing more than their home’s worth due to borrowing too much. Selling or refinancing the property in the future may become very challenging since your property will not sell for enough to pay off your previous loan or appraise enough to get a new loan. Suppose cash-out refinancing puts your loan amount above 80% of the total value of your property. In that case, you may also be responsible for paying for PMI (private mortgage insurance) to help protect your lender if you default.
Consider The Cost Of Your Loan
Cash-out refinancing will generally increase the total costs of repaying your new mortgage since you will make your loan larger. If your new loan is for a significant amount and comes with a more extended repayment period, your cost can be substantial. There are also several additional costs in the refinancing process. You might have to pay for the cost of an appraisal, mortgage originating fee, title insurance fees, a credit check, and other expenses that can quickly add up to several thousand dollars. Real estate lenders have to disclose the total cost of your loan, so ensure you consider these things when determining if cash-out refinancing makes sense.
Have Your Finances In Order
When you apply for a real estate mortgage loan, having your ducks in a row regarding finances is critical. You must ensure that you have a stable source of income, a decent credit score, and a low DTI ratio (debt-to-income). These factors can increase your chances of getting approval and make it possible to get a better rate for your loan.Â
Compare Different Lenders Before FinalizingÂ
Thanks to the internet, everyone has multiple options when selecting a real estate lender. Many lenders offer pre-approval easily, quickly, and without affecting your credit, making it easier to determine the best loan for you. Though you could still apply for a loan from a traditional bank or credit union, it’s worth researching and getting quotes from multiple lenders before finalizing anything. It will help you get the best deal possible for your cash-out refinancing.
Use Your Cash Wisely
There are times when it makes perfect sense to consider cash-out refinancing. For instance, if you need to pay a high-interest debt, a cash-out refinance is an affordable way you can do that. Taking out cash for your next home improvement project also makes sense, thanks to the tax deductibility of mortgage interest for loans over $750,000 and the low-interest rates. However, it would help if you always kept in mind that you are putting your property on the line with these mortgages. You need to ensure you don’t face foreclosure for something you couldn’t afford or did not need. Similarly, if you use this cash to repay your credit card or any other high-interest debt, you mustn’t charge your cards and get deeper into the hole.
Our team from Real Estate Funding Solutions can help you qualify for a cash-out refinance loan and find the most affordable interest rates. All you need from you is to be financially ready to repay your loan without any issues.
Contact Real Estate Funding Solutions To Get Started!
When you contact Real Estate Funding Solutions, our experts will tell you everything you need to know about cash-out refinancing to help you decide if it’s the right decision. Moreover, our experts can help you meet all the lending criteria for your loan and compare rates from multiple lenders before finalizing. With our professional help and guidance, you can easily make wise financial decisions for your future. Call us at 855-913-8637 to get started with the process today!