5 Things to Consider Before Your Cash Out Refinance Application
Questions to Consider Before Your Cash Out Refinance Application
Cash out refinance is a process where the borrower takes out new loan with a larger principal than before and gets cash out on the balance. If cash out refinance is used responsibly it can prove to be very beneficial. Let us take a look at the benefits as well as risks of cash-out refinance.
Benefits of cash out refinance
- Improved cash flow and reserves – A cash out refinance can put you in a better cash flow position if you pay off high-interest revolving debts with it
- Improved credit scores and better interest rates – The interest rates are usually low in cash out refinance
- Tax benefits – The mortgage interest is tax-deductible when you roll your high interest debt into a mortgage payment
Risk of cash out refinance
- Longer period to pay off the debt – If you are close to paying off your mortgage then cash out refinance may be not for you.
- Fees – You can end up paying hundreds even thousands of dollars in closing costs
- Risk of going underwater – If you are a serial refinancer then you could end up in an underwater mortgage.
Questions to Consider Before Cashing Out
When you are thinking about going for cash out refinance then there are certain things that you need to consider, these are:
- Duration – The option works only when you plan to live or own the property for a long period of time
- Employment situation – If your job is not stable or you work in a volatile industry than this is probably not the best option for you
- Upcoming expenses – if you have big expenses like car, taxes, tuitions, roofs or medical coming up then going for cash out refinance might not be intelligent before you pay off your expenses
Apply While Rates are Low
Email us or speak with one of our Cash Out Refinance experts today at 877-342-7449.