14 May, 2020
A DIYer’s Dream Come True
If there’s an upside to quarantine and stay-at-home orders, it’s that you finally have some more time on your hands. Now you can knock out those do-it-yourself projects that you never quite got around to.
Of course, you might have time, but you also need the money. If you do need funds, a cash-out refinance may be the solution you’re looking for.
All About Cash-Out Funds
A cash-out refinance allows you to refinance your mortgage for more than you owe on your house. The difference is cashed out to you to spend how you choose.
This option isn’t available to everyone. You must have enough equity built up. However, more than 14.5 million homeowners across the country are “equity rich” — meaning more than half of the home’s market value has been paid off. Is your home one of them? Then it could be time to put those funds to work for you.
Amount of Cash
How much cash can you get with a home equity refinance? That depends on several factors:
Your equity. What is the amount of equity in your home? That’s determined by the difference between your home’s fair market value and how much you still owe on your current mortgage. For example, if your home is appraised at $400,000 and you owe $150,000, your equity is $250,000.
Your credit score. As with any loan, lenders will look at several factors: your credit score, finances, income and debt levels at the time you apply. Those numbers will be factored into the loan amount and interest rate. Keep in mind that if you plan to consolidate and pay off other loans, your debt ratio will decrease, which may allow you to obtain more for this loan.
Your loan. The amount of cash your home can get you also depends on the loan-to-value (LTV) set by the home loan program you decide on. The goal is to maximize your benefits so you get the most out of your refinance.
Pros of a Cash-Out Refi Loan for DIY Work
- This loan may have a lower interest rate than a home equity loan or home equity line of credit.
- By making much-needed repairs and renovations, you may also be raising the value of your home.
- The interest you pay back may be lower than a credit card.
Cons of a Cash-Out Refi Loan
- You may have to cover the closing costs, so keep those extra fees in mind as you consider this loan.
- You may not borrow more than the equity in your home.
- If you borrow more than 80% of your home’s value, you will also have to pay private mortgage insurance (PMI).
We want to help you make the right financial decisions. If cashing out on your mortgage isn’t in your best interest, we’ll tell you.