Calculate Your Cash-Out Refinancing and Connect with Top Lenders
Use the FREEandCLEAR Cash-Out Mortgage Refinance Calculator to determine if you have enough equity in your property to do a cash-out refinancing of your existing mortgage. When you submit your information we connect you with up to four leading lenders so that you can compare mortgages and find the mortgage that is right for you. We also offer a version of this calculator that does not require personal information
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What Borrowers Should Know About a Cash-Out Refinance
Make Sure You Have Sufficient Equity in Your Property
You must have enough equity in your property to take cash out of it. Equity is the difference between the value of your property and the amount of debt on a property. For example, if your property value is $100,000 and your mortgage balance is $70,000 then you have $30,000 in home equity -- $100,000 (property value) - $70,000 (mortgage balance) = $30,000 (home equity). Most lenders apply a maximum loan-value (LTV) ratio of 80% for a cash-out refinance and some lenders apply a lower LTV ratio of 60% - 70% for larger mortgage amounts (jumbo loans) or if you are taking a significant amount of money out of your home. Before you apply for a cash-out refinance make sure that your property is valued high enough to support the mortgage amount you are seeking. If the value of your property has declined or you have a significant mortgage balance you may not have sufficient equity to do a cash-out refinance.
Your Interest Rate May Be Higher
Lenders typically charge a higher interest rate for a cash-out refinance as compared to a regular mortgage refinance. In some cases your interest rate may be .250% to .750% higher for a cash-out refinance depending on your credit score, loan-to-value (LTV) ratio and other factors. Lenders charge a higher interest rate because the risk for a cash-out refinance is generally perceived to be higher than other mortgages. Borrowers should be sure to shop multiple lenders to find the best terms for a cash-out refinance.
Consider All Your Home Financing Options
While a cash-out refinance offers significant financial benefits borrowers should consider other home financing options as well. In some cases borrowers are better off using a separate loan such as a home equity loan or home equity line of credit (HELOC) to access the equity in their home. Additionally, if borrowers are using the proceeds from a cash-out refinance for expenditures such as college tuition it may make more sense to take out a separate college tuition loan. A second mortgage or separate loan may charge a lower interest rate than a cash-out refinance or have a shorter term, which reduces your total interest expense over the life of your mortgage. Unless you are able to reduce your interest rate or shorten your mortgage term with a cash-out refinance then not refinancing and using a second loan may save you money in the long run.
How Borrowers Can Use Proceeds from a Cash-Out Refinance
Most lenders do not restrict how borrowers use proceeds from a cash-out refinance which means you can use the money for any number of purposes such as home renovations or remodeling, college tuition, buying a second home, investments or traveling. Because you can use your loan proceeds however you want, a cash-out refinance provides borrowers with significant financial flexibility.
More FREEandCLEAR Mortgage Resources
Review our comprehensive explanation of how a cash-out refinance works including key borrower considerations and an informative example of a cash-out refinance
Borrowers should compare a cash-out refinance to a separate loan such as a home equity loan or line of credit. In some cases it makes more financial sense to obtain a second loan or mortgage instead of doing a cash-out refinance
Compare mortgage refinance rates for leading lenders near you. Comparing mortgage proposals from multiple lenders is the best way to save money when you refinance
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