Monthly Archives: February 2021

What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a new loan for
more than you owe on your property. The difference goes to you in cash
and you can spend it on home improvements, debt consolidation or other
financial needs. You must have equity built up in your house to use a cash-
out refinance.

Pros of a cash-out refinance
There are many advantages to using a cash-out refinance over other types
of loan products if you need a large sum of money. Here are some
common reasons to use a cash-out refinance:
 Get a lower interest rate on your mortgage – This is the most
common reason why most people do a traditional refinance, and it
makes sense for cash-out refinancing, too, because you’ll be taking
on a larger loan.
 Make value-added home improvements or repairs to your
property – property owner who use cash-out refits for these types of
projects can deduct the mortgage interest from their taxes if these
projects substantially increase the home’s value. Also, tapping your
property’s equity could be less expensive than other forms of
financing, such as personal loans or credit cards.
 Consolidate and pay off high-interest debt – This move might
make financial sense, but make sure the math checks out, says
Cash-out refinancing is beneficial if you can reduce the interest rate
on your primary mortgage and make good use of the funds you take
out