One of the most common ways to earn money from owning your own home is a cash out refinance. With a cash out refinance you refinance your mortgage like you would for a regular refinance, but with one difference – you refinance for more than you need and pocket the difference. So for example if you own a home that is worth $200,000 and you still owe $90,000 on your mortgage, you need a lower interest rate, and $20,000 to pay for a new kitchen. Then refinance your current mortgage for $110,000. $90,000 would be to be paid on the existing loan, and $20,000 would go in to your pocket. Many people prefer cash out refinancing to a second mortgage or home equity loan because the interest rate on a cash out refi is usually a lot lower.
Cash out refinance Options
There are many different ways you can refinance you current mortgage, and it can be kind of confusing too. What we recommend is that you review the common refinance options below, and then use our refinance calculator to find out what mortgage would be the best fit for you and your families lifestyle. Or if you want to save all the hard work, contact one of our mortgage specialists and let them run all the hard numbers for you.
- 30 Year Fixed Mortgage
- 15 Year Fixed Mortgage
- Interest Only Loan
- Bad Credit Refinancing Options
Common Cash Out Refinance Questions
A common question we get here at Bradford Mortgage is; what can I use the cash I pull from my home for when I use a cash out refinance? And as always we say, “Whatever you want.” We always recommend people use the extra money to pay for large purchases such as home improvements, debt consolidation (great way to pay off your high interest credit cards), or to buy a new car. Benefits of using a cash out refinance are that the interest is still tax deductible and the rate is much lower.
Recent Cash Out Mortgage News
According to Freddie Mac’s Amy Crew Cutts, in the fourth quarter of 2005 American withdrew $70.3 billion in equity from their homes, which was compared to $67.2 billion in the third quarter of 2005. Freddie Mac expects that Cash Out refinancing will continue to drive this because of the difference in interest rates between a second or home equity mortgage and a cash out refinancing. Especially since mortgage rates have been so low recently, it now might be the best time to refinance.
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