A mortgage refinance helps homeowners get the most out of their investment by replacing a their existing mortgage agreement with a new, more favorable one. Similar to a Rate and Term Refinance, a Cash Out Refinance gives the homeowner a new mortgage, with a new interest rate and new term. While that’s a great benefit of refinancing, the Cash Out Refinance gives homeowners the added bonus of being able to pull out equity they’ve earned on their home.
There are two ways to gain equity in a home: home appreciation and payments. Depending on where a home is located, it may appreciate faster or slower. Whether a borrower pays their way into the equity they have gained or if it came mostly from appreciation, they can trade in their loan for a larger one, and get the difference back in cash!. This is a great option because mortgage rates are much lower than credit card or personal loan rates.
Some of the most common reasons for doing a Cash Out Refinance are to pay off debt, home improvements, or education but there are as many reasons to cash out home equity as there are financial situations. This option truly gives borrowers the ability to take full control of their investment!