(New American Funding),
You can get cash by tapping into your home’s equity. Not sure if you should do a cash-out refinance or a Home Equity Line of Credit (HELOC)? Find out the difference between the two loans and see which one is right for you! You can also check out our mortgage calculator page.
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Video transcript
Cash out Refinance and Home Equity
A key benefit of home ownership is the potential to add to your net worth by building equity in your home. Home equity typically grows as you repay your mortgage, improve your property, and as market values rise in your area. So how do you calculate your home’s equity?
Home equity is the difference between your home’s value and what you still owe on your mortgage. Suppose your home is appraised at $250,000 and you owe $150,000 on your current mortgage. This means your home equity is $100,000. You can tap into your home’s value by using a cash-out refinance or a HELOC , a home equity line of credit. Here are the differences. For a cash out refinance, cash is paid out at closing, it can have a fixed interest rate, one fixed monthly payment amount, and it remains one mortgage and one payment. A HELOC has an adjustable interest rate revolving line of credit, monthly interest payments can vary, and it has a second mortgage and second payment.
There are a few common questions about a cash-out refinance. How does a cash-out refinance work? Well, you retire your current mortgage by taking out a new mortgage for a larger amount. What happens next? The excess value of the outstanding balance on your old loan is paid to you in cash at closing. What’s needed for a cash-out refinance? You need to meet the minimum FICO requirements for your new loan and have enough equity in your home for the refinancing to make sense. This is something your loan officer can help you determine. So, what do people use a cash-out refinance for? Well, they can use it for paying off student loans, financing a wedding, buying an investment property, paying off medical bills, helping offset elder care expenses, making home improvements, paying down their credit card debt, taking a once in a lifetime trip, starting a new business, or paying for their children’s education.
Since the cash-out refinance typically resets the terms of your mortgage, it can offer several advantages over your current loan. For example, it can enable you to eliminate other debts or add to your savings, lower your mortgage interest rate lead to an increased credit score provide an opportunity to shorten the term of your mortgage, offer the potential for tax savings or free up money for attaining other goals. Cash-out refinance or HELOC loan might be the right choice for you. Give New American Funding a call today and let one of our expert loan officers reviews with you.
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