Cash Out Refinance And Why Am I Doing It

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. Then 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

A cash out refinance enables you to borrow money at the same time you refinance your loan. You refinance your mortgage and receive a check at closing.

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.

How Much Can I Cash Out Refinance 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; you can get a new loan for maximum 80% of your appraised value. Most lenders are more cautious and would only loan 70% of the appraised value.

Is Cash Out Refinance A Good Idea There are several pros and cons of a cash out refinance. Pros of a Cash Out Refinance 1. 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.

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2.. Large loan amount: It is an easy route to get your hands on a significantly large sum of money in one transaction. 3. Tax benefits: Interest rates on loans can be tax deductible depending on several factors. Talk to your CPA 4. Pay off other debts: If you have other higher interest rate debt like student loan, medical bills etc; it could be advantageous to consider cash out refinancing.

Cons of a Cash out Refinance 1. 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.

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.

What Are Cash Out Refinance Rates

Here are the Cash out refinancing rates for various terms which was quoted. 1. Make sure you get at least 3-5 different quotes 2. You will need to provide your SSN. Typically all mortgage inquiries within 14 days are combined for purpose of calculating your credit score.

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