Section 3: Cash-Out Refinance Loan Benefits
Cash-Out Refinance Loan Benefits
With a cash-out refinance, you're getting a new home loan for more than you currently owe on your house. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash, which you can spend on home improvements, debt consolidation or other financial needs. However, you'll now be repaying a larger loan with different terms, so it's important to weigh the pros and cons before committing to a cash-out refi.
1. Potentially lower interest rate
Though cash-out refinance rates tend to be higher than rates for purchase loans, you might still end up with a lower interest rate if mortgage rates were higher when you originally bought your home. For example, in 2018, the average rate on a 30-year fixed mortgage went as high as 4.94%. These days, rates are considerably lower. (However, if you only want to lock in a lower interest rate on your mortgage and don’t need the cash, a rate and term refinance makes more sense.)
2. Just one loan
Since it's a refinance, you'll be dealing with one loan payment per month. Other ways of leveraging home equity require a second mortgage.
3. Access to more funds
Cash-out refinances are helpful with major expenses, like a home renovation or college tuition, because you generally can borrow much more than you could with a personal loan or by using credit cards.
4. Debt consolidation
Using the money from a cash-out refinance to pay off high-interest credit cards could save you thousands of dollars in interest.
5. Higher credit score
Paying off your credit cards in full with a cash-out refinance may build your credit score by reducing your credit utilization ratio — the amount of available credit you’re using.
Common Questions on Cash-Out Refinance Loans
- Are Cash-Out Refinance loans better?
A cash-out refinance can make sense if you can get a good interest rate on the new loan — and depending on what you plan to do with the money. Seeking a refinance to fund vacations or a new car isn't a good idea, because you'll have little to no return on your money. On the other hand, using the money to fund a home renovation can rebuild the equity you're taking out. Everyone has unique needs for their buying situation. Although Cash-Out Refinance loans are very competitive, they are not always the best choice for the consumer. Because of that we recommend you talk to your loan professional for your specific needs.
- Are there any benefits to sellers?
Cash-Out Refinance loan l loan buyers have the lease restrictions when it comes to buying and is typically a sought-after product when looking at offers.
- What are Orbit Realty’s and Orbit Home loans benefits?
With Orbit Realty you and Orbit home loans you get the benefit of working with a team that is highly trained and qualified. Okay, maybe every company says they have that, but the truth is that only 10% of companies nation-wide have both a real estate and mortgage company combined and because of that we are able to be one of the most competitive lenders on the market. We are also able to pass savings onto you buy not having to change additional fees that you often see with other lenders.
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