3 features of a cash-out refinance that indicate you are making a wise move.
LOS ANGELES, Aug. 2, 2022 /PRNewswire/ -- A popular option during a refinance is to borrow more than your mortgage balance and take the surplus in cash. You don't have to pay taxes or penalties on this cash, unlike when you withdraw from a retirement account, and the interest rate is bound to be lower than a typical credit card.
The average rate for a 15-year mortgage (fixed) just dipped to 4.45% according to Mortgage News Daily, almost a whole point lower than in spring. A rate 1% lower than your current rate opens the door for smart refinancing.
A smart cash-out refi has these three features:
If a new mortgage adds years of debt, then the cash didn't really come from your equity, at least not all of it. You'll be spending those extra years paying it back. A sign of a smart cash-out refi is your loan term stays the same. Therefore, if you refinance a 30-year mortgage at the 22-year mark, look into a new mortgage of 22 years.
Remember: A rate just 1% lower than your current rate can save you thousands. Get fast personalized quotes through Lendgo before rates rise.
The power of a lower interest rate combined with surging home values is that you can borrow enough to pay off the old mortgage, get cash, and keep your same payment. There will be closing costs for the new mortgage, but you still come out ahead. Where did the extra money come from? It came from your equity.
Since a refi takes time and paperwork and carries closing costs, you should have a wise plan for the cash. Home repairs are a good use because money from equity gets reinvested in the home.
Paying off credit cards (not just paying them down) is another good use. Then keep the balances low enough that you can pay them off every month. When you never float a balance, you never pay a dollar in interest.
Another smart use is college. Dumb uses include gambling, shopping sprees, and getting in on a "sure thing" in the stock market.
Explore all your refi options on the platform where lenders compete to win your loan: Lendgo.
Media contact: Lendgo, 844-551-6667
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