Do you own a home? Do you have high-interest debt (credit cards, student loans, car payments, etc.)? With today’s rapidly rising equity in homes, it may be time to have your home start working for you with a cash-out/debt consolidation home loan. Did you know you could use a Cash Out Refinance to Pay Off Debt?
What Is a Cash Out Refinance?
A home mortgage refinances loan allows you to replace your current mortgage loan with a new one. Many people refinance their mortgage loan to get a lower interest rate and monthly payment. But as the principal amount of your loan goes down and the value of your home appreciates, a cash-out refinance also allows you to tap some of the equity you’ve built.
For example, let’s say you currently have a $250,000 mortgage balance on a home worth $400,000. Our lenders will let you borrow up to 80% of the home’s value, so you could potentially refinance your loan for up to $320,000.
The difference between the new loan amount and the original loan balance is what you’d receive in cash. You can use that money for just about anything you want, including:
· Debt consolidation
· Home improvements
· Emergency expenses
· Retirement savings
· Education savings
· Other major expenses
How Does a Cash Out Refinance Work?
Let’s say your monthly principal and interest payment on a $250,000 mortgage is $1,122.61 (this is based on a rate of 3.5%) and you have $40,000 in consumer debt that has a combined monthly payment of $1,300, this all together have you shelling out $2,422.61 per month. Now, you do a cash-out/debt consolidation loan for $295,000 (this number accounts for closing cost rolled in) at a rate of 3% (based on rates for 11/21) and your new monthly principal and interest payment is $1,243.73 – this is a monthly savings of $1,178.88 AND you are able to get a higher year-end interest write off on your taxes. This monthly savings is life-changing for most people.
Now keep this in mind, you don’t have to reset your mortgage term back to a 30 year, you can set your new loan term to what you have left on your current mortgage (i.e. if you have 23 years left, let us do a new 23-year mortgage) and still save money each month without losing all the ground you have already made.
Cash out/Debt consolidation loans certainly have their advantages, they may not be for everyone and that’s why we are here to help. I love numbers and I like them even more because they don’t lie. Call or email me, tell me what you are wanting, what you need and would like to do and ill send over a complete breakdown of your loan options to see if a cash out/debt consolidation loan is right for you.