Should I pull cash out on my mortgage refinance?
That's a good question, and a difficult one for many people to decide. Pulling cash out on your mortgage can be done for many purposes, and as long as the money is used wisely, a cash out refinance can be a very good financial decision.
There are four main reasons why our clients pull cash out of their home equity:
1. Pay off other debts
Paying off your other debts by using your home equity can be a huge relief on your monthly budget. The idea of spreading out your debt over 30 years may not seem appealing on the surface, but the peace of mind to have most or all of your other debts paid off, and be left with only a mortgage payment, can be a huge stress reliever. Also, home equity in a sense is only a short term loan because most people are not in the same home for 30 years. The newly acquired debt can be paid back when you sell your home.
2. Pay for a remodel or other home improvement
This is a very common use of home equity. There are two ways to finance home improvements. One way is through a home equity line of credit or HELOC. HELOC's are OK, but have the riskiness of being an adjustable rate loan from the very first month. If rates go up, your payment will go up right away!
The other solution is a cash out refinance, where we restructure your current loan and pull out the funds you need. This is a more secure way to do it because you can lock in a long term fixed rate. However, you will want to make sure of your budget before closing on the cash out loan because if you need more money to complete the remodel, you can't borrow more on the mortgage loan.
3. Make other investments
Mortgage debt can be obtained at a low rate, and it's tax deductible. Savvy financial planner will advise to pull out your home equity to invest in the markets, because you can make a much better rate of return on your money than it costs to borrow it. Be careful with this strategy. You will want to make sure you have a sound and stable financial plan before you invest your equity in the markets.
4. Pay for a large ticket item
Sometimes it's necessary to pull cash out to pay for a large ticket item such as a wedding, vacation, or college tuition. This is another good use of home equity if there are not other solutions.
To find out how much cash out you can qualify for, give us a call at 303-670-0137 or email us at email@example.com. We are here to answer your questions, even right now (try it!).