For homeowners who already built strong equity, the cash-out refi will be their option to improve their financial situation. By tapping into your home’s equity, you get to access a lump sum by replacing your existing mortgage. In turn, one can choose to spend the money and finance whatever activities they deem fit.
If you have the following reasons to take out a Cash Out Refinance Plano, then you’re making the right choice.
Table of Contents
Lower Your Interest Rate
Wise homeowners take advantage of cash out refinancing to score lower interest rates. Cash out refi offers lower interest compared to Home Equity Loans and Home Equity Lines Of Credit. If you need cold money and would like to snag a mortgage with lower interest rates, then a cash refi will make sense.
Secure A Large Lump Sum Of Cash
Home equity is a wealth you can only take advantage of by either selling your home or tapping into your equity. With a cash-out refi, you get a lump sum of money and the freedom to choose however you want to use it. By making necessary repairs and maintenance and doing home renovation projects that can add beauty and value to your home, you’re making good use of your equity.
Get A Tax Deduction
Mortgage interest can sometimes be deducted to your taxes. This is true especially if you use the cash to fund home improvement projects. However, it would be best to consult your tax advisor to make sure which ones you can deduct from your taxes.
Good Read: Pros and Cons of Cash-Out Refinancing
Consolidate Debt
If one of your main reasons in getting a cash-out refi is to consolidate debts, then you could be making the right choice. Take credit card debts, for example. If you’re unable to make regular payments and you only settle for the minimum monthly fees, this can lead to huge interest rates. By using the lump sum to pay off credit card debts, you’re freeing yourself of CC debts. This is usually a little more than half the amount you need to pay, saving you hundreds to even thousands in cash.
Finance A Higher Education
Finance your child’s college expenses can be quite expensive. While you can use federal student grants and loans to fund a college education, it would be best to consider other options such as a cash-out refinance. By refinancing your mortgage, the lower interest rates plus a large amount of cash you can get can pave the way to your child’s higher education. With a shorter repayment solution, it can be the financial cushion you’ve been searching for.
Improve Your FICO Score and Credit Report
A mortgage can make or break your credit score and history. If you took out a larger loan and was able to pay back your lender regularly and on time, this will serve as good credit history and your FICO score will improve. With a good credit score and your good-paying debt history, you can score better loans in the future, score lower interest rates and can even qualify you for better insurance rates and also a good job.
Good Read: 7 home refinance options for people with bad credit
Applying for a Cash Out Refi offers tons of benefits – only if you use your equity in the best possible ways. Unless your reasons in taking out a cash-out refi mortgage are to spend it on gambling, funding luxurious buys and other investments not worth investing, then a cash-out refi is an excellent way to tap on your equity.