Every homeowner has their reasons for considering a cash-out refinance with purposes ranging from home repairs to covering college tuition or buying an investment property.
A cash-out refinance replaces a current home loan with a larger mortgage, allowing the owner to take advantage of the equity they built up in their home to access the difference between the two mortgages in cash. Here are just a few examples of what a cash-out refinance can help you fund!
Home Projects, Repairs and Renovations
One of the most obvious way to use a cash-out refinance is to make repairs or improvements to your home. In fact, using the funds from a cash-out refinance toward projects that increase the value and accessibility of your home makes your mortgage interest rate tax-deductible! Home improvement projects like a kitchen remodel, a new roof, a replacement HVAC system, or a new patio deck are just a few ways to put your cash-out refinance to work on improving your current home!
College Tuition
Education is expensive, so tapping into home equity to pay for college can make sense if the refinance rate is lower than the rate for a student loan. In fact, between 1980 and 2020, college costs increased by 180%, so tapping into home equity is a great tool for homeowners to be able to afford college costs.
Debt Consolidation
Cash-out refinance loans can be powerful tools when you need to pay off a lot of lingering, high-interest debt like credit card accounts or personal loans. If you use funds from a cash-out refinance to pay off all open credit cards, you can use the money you were paying on credit card debt to pay down the mortgage loan’s principal balance each month in addition to making the regular mortgage payment. This strategy allows you to exponentially save while reducing your overall debt load.
Investment Purposes
A cash-out refinance can also assist you with adding to or protecting your existing investments. For example, if you need cash and do not want to sell existing investments like retirement savings or CDs, tapping your home equity might be a cheaper option. A cash-out refinance can help you diversify your holdings, too, or protect against a housing market downturn. Talking to a trusted financial planner can help you determine the best strategy.
If you have questions about whether a cash-out refinance is a smart strategy for your financial needs, contact one of our expert Loan Officers today!