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Are you looking to refinance your mortgage and create a quick influx of cash?
Cash-out refinancing is a refinancing option that allows the borrower to receive money by taking out a larger mortgage on their property than their current mortgage. The monetary difference between the two mortgages is converted into cash and made available to the borrower.
If you’ve been asking yourself whether a cash-out refi or a home equity loan is a better option for you, read on to inform your decision-making process.
Mortgage Application Notice: SouthStar Bank is currently experiencing a high volume of mortgage refinance applications. We are prioritizing purchase applications to ensure we meet closing dates, but will process your refinance requests as quickly as possible. We appreciate your patience and thank you for your loyalty.
How Could a Cash-Out Refinance Help You?
Receive cash for major expenses.
Consolidate your debt.
Reinvest the cash you get back into your home.
Shorten your loan term and/or get a lower rate.
How Much Can I Cash-Out Refinance?
How much you can refinance depends on a few things. One of the biggest components to determining the amount of a cash-out refinance is how much of your home you currently own. To qualify for a cash-out refinance, you need at least 30% home equity. However, the more stake you have invested in your home, the more cash you’re entitled to.
The other key component that determines how much money you’re eligible to borrow is the loan to value ratio (LTV) on your home. The LTV is essentially a refinance calculator. The maximum LTV for a cash-out refinance loan is 80%. For example, if your property has an appraised value of $400,000 and you currently have a loan balance of $200,000 (50% LTV), you are eligible for 80% of the $400,000 appraised value, or up to $320,000. This means that you can take $120,000 ($320,000 – $200,000) home from the cash-out refinance.
Note* The loan to value ratio is based on the current market conditions of your home and surrounding area.
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Be Mindful of Who You Borrow From
Lenders can offer usurious mortgage rates if they aren’t kept in check by borrowers. The saying, “Buyers beware,” applies to borrowers as well. Consult online publications and reviews to gain a deeper understanding of who you’re borrowing from. Like any loan, this type of refinancing is only ideal when you’re comfortable with the risks you’re taking. Who you borrow from should reinforce your comfort.
A Cash-Out Refinance Mortgage Offers You Options
If your mortgage rate is too high and out of date, you’re looking to invest in your home and improve its value, or you have an outstanding debt with an exorbitant APR, refinancing might be your best option. However, it’s important to avoid rushing when it comes to loans of this size. Take your time, do your research, and apply for loans responsibly.