Most retired folks would advise paying off your mortgage as you are closer to retirement. In fact, they prefer to be mortgage free once they no longer have a steady paycheck. hen why am I considering doing a cash out refinance and taking out a $690,000 loan on my primary residence?
What Is A Cash Out Refinance
In a traditional refinance, you replace your existing mortgage with a new one for the same balance but with a lower interest rate or lower term or both.
A cash out refinance is different from a traditional refinance.
A cashout refinance enables you to borrow money at the same time you refinance your loan. You refinance your mortgage and receive a check at closing.
Any lender wanting to do cash out refinancing would want some equity to be still present in the house. Given the tightening of the banking regulations after the Great Financial Crisis.
Pros of a Cash Out Refinance1. Interest Rate: Given that we have been in a secular downward trend with respect to interest rates; it is quite possible that the current interest rate would be lower that your prior rate.
1. Large loan amount: It is an easy route to get your hands on a significantly large sum of money in one transaction.
2. Tax benefits: Interest rates on loans can be tax deductible depending on several factors. Talk to your CPA
Cons of a Cash out Refinance1. Total interest: Due to the nature of the amortization schedule; you pay most of the interest in the early part of the loan and very little principal.2. Losing your house: Typically it makes sense to use the cash out refinancing to pay off higher interest loans. But never trade an unsecured loan for a secured loan unless you know what you are doing.
Which Is Better – Cash Out Refinance or Home Equity Line Of Credit (HELOC)
There are a number of differences between cash out refinancing and HELOC
1. Interest rate variability: Cash out refinance has a fixed rate while HELOCs generally are tied to a prime rate which is adjusted regularly.
2. Level of interest rate: If today’s mortgage rates are higher than your fixed rate mortgage; a HELOC might work better.
What Are Cash Out Refinance Rates
If you have been shopping around; you would have noticed that cash out refinance does cost more than a traditional mortgage.
Swipe Upto learn Cash Out Refinance And Why Am I Doing It
Swipe Upto learn Cash Out Refinance And Why Am I Doing It