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Cash Out Refinance
A refinance transaction in which the borrower receives cash in excess of existing mortgages and certain financing costs.
Debt consolidation is one of the most common motivating factors behind a cash out refinance.
When consolidating high interest revolving debt like credit cards, it's very possible to see enormous monthly savings in your monthly expenses.
Sometimes, cash out from a refinance is used for home improvements. This can help increase the value of the home.
Frequently real estate investors use cash-out refi's as a vehicle to take equity out of properties they own for re-investment. It is common to rotate equity reduction from properties on a cycle and is an excellent vehicle for re-investment and therefore expansion of leveraged appreciation. One must remember the 4 reasons for owning commercial property and use the proper strategies for expanding your overall income.
Often, when a homeowner has high revolving debt payments such as credit cards, a cash-out refinance to pay off these debts will result in lower monthly expenses for the homeowner.
Something to think about when weighing whether or not refinancing is the right move for you is your tax deduction. Taxes from your mortgage can be written off, while taxes from your credit cards cannot. Not only can a refinance help you consolidate debt into one payment with a lower interest rate, but the tax incurred can be written off.
Depending on your situation, it may make more sense to take out a home equity loan than refinance your first mortgage with cash out. Consult your mortgage professional to find out which is more appropriate.
While most lenders will place limits on the maximum mount of cash out you may receive from a mortgage refinance, we do have programs available which allow for unlimited cash out refinancing.
Refinancing with Cash Out is an option but if you are borrowing more than 70% of your home's value, you can expect a little bit higher of an interest rate than if you weren't refinancing with cash out.
Refinancing your mortgage and taking cash out can be an excellent way to reduce debt with non-deductible interest. Remember that the money is still and a loan that must be repaid and should be used wisely.
With an FHA mortgage, you can draw cash out of your home up to 95% of the appraised value. Consider carefully whether the benefits of doing a cash out refinance outweigh the advantages. Sometimes it is the correct decision and other times it is not advisable.
Cash out loans allows for a borrower to get extra money for any activity at an excellent rate that oftentimes beats the interest rate for personal loans or credit cards offered by banks.
One thing to consider on a cash out refinance is the break even point. At what point will you recover your costs of the loan? Take your total costs and divide it by your monthly savings to get a break even point.
» DISCLAIMER: The information contained in this article on 'Cash Out Refinance' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.
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