A cash-out refinance replaces your existing mortgage with a new one for a larger amount. The difference goes to you in cash to spend on anything you choose. With a rate and term refinance, your existing mortgage is replaced with a new one for the same balance.
Many DuPage Credit Union Members use this extra cash to make home improvements in lieu of a home equity loan. Another popular option is using the cash to pay down debt. Whatever your need, a cash-out refinance can be a great option to get the cash you need at a favorable rate.
How a Cash-out Refinance Works
Say you owe $80,000 on a house that is worth $200,000 and you need $50,000 to do some remodeling. You could refinance for $130,000 (the $80,000 you owe + $50,000 you want) to walk away with $50,000 in cash and a new interest rate for the full amount.
Here are 5 great reasons why you should consider a cash-out refinance:
1. Shorten Your Home Loan Term
Own your home outright faster by shortening your loan term. If your finances have changed over the past few years because you’ve added a second income, got a promotion, paid down debt or came into an inheritance, now is the time to take advantage of low rates to refinance your loan.
2. Lower Your Interest Rate with a Cash-out Refinance
Mortgage rates are still historically low. For example, the average rate on a 30-year fixed mortgage in May of 2000 was 8.52% APR, according to Freddie Mac. Check out today’s mortgage rates to compare with your current rate to see how much you could save.
3. One Loan, One Payment
Save time and money each month by using our cash-out refinance mortgage to roll an existing home equity loan into a lower-rate mortgage.
4. Improve Your Credit Score
Use your home’s equity to help pay off unsecured and revolving debt, such as credit cards and pay day loans, to boost your credit score. By improving your credit score you may qualify for better loan and insurance rates, gain negotiating power and even help you secure a job.
5. Cold, Hard Cash
Refinance your home to get cash for what matters most to you! Whether it’s a motorcycle for hitting the open road, updating a kitchen or an African photo-safari — by refinancing your home loan into a cash-out refinance mortgage, you’ll enjoy extra cash now.
Is a Cash-Out Refinance Right for You?
Schedule a free home loan consultation with one of our friendly home loan experts. They’ll be happy to meet with you, in person or over the phone, to discuss how a cash-out refinance mortgage could work for you.