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Is a Cash-Out Refi Right For Me?


The Spire

With property values on the rise, most homeowners have experienced an increase in their home’s equity in a relatively short period of time. As a result, a cash-out refinance has become an extremely popular method of obtaining money for other uses, including debt consolidation, college tuition, home improvement projects, and covering medical expenses.

A cash-out refi replaces your current mortgage with a new loan based on your home’s current value that combines your loan balance plus the cash amount. You will usually see available refinance rates lower than those associated with a home equity line of credit (HELOC) and may experience even greater benefit if your current loan originated at a higher interest rate than that of your refinance.

The process involved with a cash-out refinance is similar to the home buying process in that your lender will review your credit score, remaining equity percent left in the home, mortgage payment history, bank records, and income versus debts to ensure you can afford the new loan payment. Keep in mind that cash-out amounts are limited to 80-90% of your home’s value so even if your value has risen significantly recently, you still might not be able to pull funds out if you can’t leave enough equity in the home to meet guidelines. How much do closing costs cost may be a factor to consider in obtaining a cash-out refi as well. That said, these can be rolled into your new mortgage on a cashout refinance and will subtract from the overall funds you can pull out.

By far, the biggest reason for getting a cashout refinance is to pay off other higher-payment debts and put some money into your savings account. One example might be where you have $30,000 in high-interest credit cards with a monthly payment of $1,200 for the minimum payments. You could get a cashout refinance that pulls out $40,000 and pays off the monthly credit payment of $1,200 while only increasing your mortgage payment by $180 each month. Now you have $10,000 leftover in your bank account, $1,020 less in bills monthly, and are completely credit card debt-free.

Do you want to see what your scenario might look like? Let our team of experienced mortgage professionals help determine if a cash-out refinance is right for you!

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.