Taking Cash Out of Your Home

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What Exactly is a Cash Out Refinance

A cash out refinance offers homeowners a way to leverage their home equity to help fund financial demands and wants for their current stage in life. Oftentimes, a cash out refinance will be done in conjunction with getting a better rate, but that is not the entire goal.

Instead, the goal of a cash out refinance is to borrow additional money, without using credit cards or taking out a second mortgage. With a cash out refinance, the homeowner will increase the amount of their existing home loan, gaining access to the additional funds for their own discretionary usage.

What Can You Do With the Money You Cash Out?

There are currently no limitations on what individuals can do with the money they take out. Some common examples of how homeowners use their cash out, include:

  • Home renovations
  • Pay off high interest credit cards
  • Pay off student loans or pay for a child’s college
  • Consolidate debt
  • Down payment on another property
  • Pay for a child’s wedding
  • Buy out an ex-spouse
  • Cover medical bills
  • Many other options

The cash out refinance option offers financial flexibility to homeowners, allowing them to use the equity they have built up in their home to achieve their personal and fiscal goals.

Advisors Mortgage Group Can Help

There are many variables to consider when thinking about taking cash out from your home. Taking cash out can be a powerful tool for homeowners looking to make an investment, but it is not always the right decision.

Before recommending a cash out refinance, Advisors Mortgage Group prioritizes educating the homeowner — both of the benefits and the drawbacks of a cash out. They will help you analyze your individual situation to ensure that a cash out makes sense for you and will help you achieve your objectives. You will always talk to a real human who can help you understand how much money you can take out, and how it can affect your payment and your rate.

Advisors Mortgage takes pride in helping its customers make smart financial decisions that take into consideration their individual circumstances and objectives.

The process of taking cash out is generally the same as when you refinance to get a better rate.
There is no pre-approval required. To start, you will want to make sure you have a good understanding of how much money you need. This may involve hiring contractors to get an estimate, adding up all of your debt, or getting written estimates for any purchases or investments.

Once you have determined your true financial need, you will submit an application to a lender, like Advisors Mortgage Group. At this point, the lender will assess your financial profile and will inform you of any cash out requirements.

Once a homeowner applies for a cash out refinance, the lender will schedule a home appraisal and begin the underwriting process. The appraisal will assess the current value of your home. It may have risen in value since your initial purchase. This value, plus the amount of principal you have paid, will establish a base level for how much money you can take out.

The lender will also evaluate your debt levels, credit score and other factors in order to assess how much cash (and at what rate) they are able to lend.

Once approved for a cash out refinance, and before your closing, your loan officer will provide paperwork detailing your new loan. Any money distributed will be issued after the closing process.

As your home equity increases, so does your financial freedom. Understand the investment power your home equity offers.

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Common Questions About Taking Cash Out of Your Home

There are currently no limitations on how you will be using the money from a cash out refinance. However, there are limitations on how much money you can take out, based upon many factors including equity amount, level of debt, credit score and others.

The amount of cash out available depends on the level of equity you currently possess in your home. Your equity is based on the amount of principal paid, as well as any market-based rise in home value. Typically, there is a minimum level of equity that must remain in the home, but this varies based upon the type of mortgage you carry.

Yes, your current mortgage payments will change. New factors, such as the added cash out must be added to your principal, plus the refinance will be based upon a new rate. Your lender can help you understand how much your monthly payments will be affected.

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