With property values on the rise nationwide, many homeowners have experienced substantial growth in their home equity, making a cash-out refinance an attractive option for home repairs or paying off other debt. As the name implies, this type of mortgage product allows you to borrow more than you owe, often at a lower interest rate than an existing loan, and keep the difference in cash. Comparing your options will offer you an affordable solution that helps improve your finances. In this short article, we will weight the advantages of a cash-out refinance.
Consolidate Higher-Interest Debts
A great way to improve your financial situation is to pay off higher-interest debt with money obtained from a cash-out refinance. Credit cards, student loans, and auto loans typically all have higher interest rates than a mortgage. Therefore, using your home’s equity to pay them off will not only save you money, but it saves you the amount of interest you’re paying to a servicer or bank.
Pay for Higher Education
As mentioned above, student loans often come with a higher interest rate than a mortgage. When paying for higher education for someone in your family, it can be beneficial to pay for or pay off that debt with the equity in your home. If you have a college-aged child, considering a cash-out refinance could be a good alternative to taking out private student loans, which might have a higher interest rate.
Pay for Home Improvement
Using a cash-out refinance can benefit a homeowner two-fold, by not only providing funds for a renovation or remodel, but also by increasing equity in the long run through upgrading the property and typically equating to a higher sales price overall. If you have the equity available to you, the advantages of a cash-out refinance can seem more attractive than a HELOC because of the lower interest rates.
If you think a cash-out refinance is a good possibility for you, the Spire team is ready to help advise which loan product is the best option for meeting your short and long-term financial goals.