When you take out a mortgage, such as a 30-year fixed-rate loan, it can almost seem like a lifetime commitment. While you are certainly responsible for that debt, you are not necessarily stuck with that particular debt. Instead, you can refinance your mortgage, which means replacing your old mortgage with a new loan. The new loan funds the old loan, and you are left with the terms of the new mortgage.
So, you can refinance to switch from a 30-year to aIf you are in a good financial position to pay off your mortgage quickly. By shortening the loan term, your monthly payment can be higher but the interest rate is lower, which can save you money in the long run.
Another option is to do one. With this option, you can borrow more money based on your home equity. This equity can be created from payments made to pay off your mortgage principal and/or to increase the appraised value of your home.
If you stick with your current mortgage, you won’t see that equity until you eventually sell your home. But with, you can turn that equity into liquid funds. And vice versa a home equity loan or a A cash-out refinance gives you liquidity while replacing your old mortgage with a new one instead of adding a separate source of debt.
You can start exploring your cash-out mortgage refinancing options online now or use the table below to get started.
Cash-out refinancing amount
Typically, a cash-out refinance is limited to an 80% loan-to-value (LTV) ratio on a single-family home. In other words, your loan cannot equal more than 80% of the value of your home. However, this amount may vary based on factors such as the lender you choose and some of your own personal financial circumstances.
Also, while 80% may now equal a certain amount, say, $400,000 on a $500,000 home, that can change based on real estate price movements. The more a home’s price goes up, the more you can typically borrow with a cash-out refinance, and vice versa. Plus, the more you pay off your original mortgage, the more cash you can take out.
If your home hasn’t appreciated in value and you’ve barely paid off any of your principal, there will be very little equity left to cash out. Instead, you are essentially doing a traditional refinance rather than a cash-out refinance.
So, you can wait until you build up enough equity to take out a certain amount of cash for a given need. Not only do you want to refinance to get a lower mortgage rate if possible, but you may also want a certain amount of liquidity, such as paying off high-interest debt or making other investments where you need significant cash.
Remember, however, that you’re still responsible for paying back the amount you borrowed in a cash-out refinance.
Just because your home has gone up in value by $100,000, doesn’t mean you have to take that $100,000 to buy yourself a fancy purchase. You still have to pay that money back either by paying off the new refinanced mortgage (which will be larger than your existing mortgage) or by selling your home.
You can quickly determine how much cash you can get here now or use the table below to get started
Can a cash-out refinance be higher than an 80% LTV?
Depending on the lender’s terms and your personal circumstances, you may qualify for a cash-out refinance loan with an LTV above 80%. For example, if you served in the military, you may qualify for a larger cash-out refinance. The Department of Veteran Affairs (VA) Supports loans up to 100% of a home’s value.
When can a cash-out refinance be less than an 80% LTV?
While 80% is the ideal maximum LTV for a cash-out refinance, that doesn’t mean you have to take that much, or that not all lenders will approve you for that amount.
If you have other types of debt, it may affect your ability to qualify for a larger cash-out refinance. And if you’re trying to cash-out refinance a home that you use as aFor example, you may encounter a lower maximum, such as 70-75%.
Freddie MacA government-backed enterprise that purchases mortgages from lenders (thereby reducing their risk), cash-out refinance mortgages range for a variety of property types, from 80% for a 1-unit primary residence to 70% for 2-4. % Unit investment property.
Other times, you might just want a lower amount so you’re not paying interest on extra cash you don’t need right now.
See if a cash-out refinance is right for you
Many homeowners like the financial latitude that a cash-out refinance loan can provide. But it’s a big decision you don’t want to take lightly. If you’re interested in a cash-out refinance, consider comparing your options for this type of loan with other ways to access your home equity, such as a. Then, see which makes the most sense in terms of interest rate, loan value and any other factors that are important to you. You can start online now using the table below.