Cashing out refers to the refinancing of a loan where the borrowers will borrow money on their own home. If a home is appraised at $100,000 and the borrower's outstanding mortgage loan is $60,000, it is possible to enter into an 80% cash-out refinance transaction for a loan of $80,000 (80% of $100,000). The new mortgage of $80,000 will pay off the $60,000 loan and leave $20,000 cash-out to the borrowers.
A Cash-out Mortgage Refinance is a refinance option which allows you to service the original mortgage and also provides a lump sum amount in cash. Cash-out Refinance operates on the basis of your equity (the monetary value of the percentage of the property you hold ownership) in your house property and the appraised value of your home.
Example: The value of your home is assessed at $350,000 and you have an outstanding mortgage liability worth $100,000. You can opt for a 40% cash-out refinance on your home which will allow you access to funds worth $140,000. This implies that you can service your mortgage liability worth $ 100,000 and have extra funds worth $40,000 for personal use.
The equity you own is the difference between the appraised value of your home property minus your outstanding original mortgage liability. For example, if your home is valued at $350,000 and you owe $100,000 as outstanding mortgage payments. Your equity on your property is $250,000 which is also the extent to which you can apply for a cash-out refinance.
The key benefits of cash-out mortgage refinance are:
- Access to funds after servicing mortgage liability.
- Cash-out mortgage refinance helps turn equity into cash.
- The funds can be used for home improvement, debt consolidation or any other expenditure. There are no restrictions on the use of funds.
- Cash-out refinance also provides a better interest rate and long term loans
- Lower interest rates and long term loans imply lower monthly mortgage payments spread over a long term.
- Lower interest rates also translate to savings on interest payments.
- Funds used for home improvement can increase the equity of the home.
- Cash out refinance is available up to 100% of the value of the home.
- Switching from ARM rates to fixed rates provided by cash-out mortgage ensure cost savings.
- Tax deductible interest payments provide taxation benefits.
What are the benefits?
By cashing out on your home, you can obtain cash on the value of your own home to pay off debts or upcoming expenses. The refinance transaction can also provide you with a better mortgage loan interest rate that will save on your monthly mortgage payments during the loan. And it's tax-deductible.
How can we help?
If you are looking for this type of refinancing, East
West Mortgage Company can find a program suited to your
financial needs. We offer cash-out programs for
Owner-occupied homes, Non-owner occupied homes, and No
income verification with low, affordable rates.
