First things first, what is equity? Equity is the difference between how much your home is worth and how much you owe on the home.
Example: If your home is worth $300,000 but you only owe $200,000 on your home loan, you have $100,000 in equity.
Home equity can be used to pay off debt, do home upgrades, for a down payment on a new house, to invest in more property, or even for a much needed vacation! At Ironwood Properties, we recommend that you consider all of your options before making a decision and consult your accountant or financial planner for advice.
You may be wondering how you take money out of your home's equity. By using a cash-out refinance!
Here is a blurb from Travis Williams, a Loan Officer with Alameda Mortgage in Fresno, CA about cash out refinances:
"A cash out refinance is when you pay off your old mortgage with a new mortgage, typically, a new higher loan amount. This is a great way to help borrowers procure cash by using the equity that you have in your home.
Typical qualifications for a cash out refinance are 80% loan to value in a single family home, credit worthiness, employment history just to name a few.
The pros of doing a cash out refinance is you get money back. You can use the money to pay debt off, invest in something, make major purchases or to even just save.
The cons are that your loan amount will increase and sometimes your interest rate will increase and in most cases you will start a new 30 year loan term.
In summary, cash out refinances are great for those who need cash. I would personally always recommend that clients do it for the right reasons since they’re using their home as collateral."
At Ironwood Properties, we recommend consulting your accountant or financial planner to explore your options.
Using a cash out refinance is one way to buy a second home and keep your first. This opens up the option for having a rental property and creating another stream of income that will pay you in the end. The possibilities are endless if you plan and invest well!
Another thing to consider is home upgrades. Let's say you have house but it needs some repairs or upgrades. Using a cash out refinance will give you the capital to fund the project.
A cash out refinance is not the only type of refinance available. You can also refinance your home for only the amount that you owe on the loan. This is a good option for someone who may qualify for a lower interest rate, lower monthly payment, or different loan type.
Is refinancing right for you? Something to consider is the cost of getting a new loan. There are fees to process and fund a loan. Planning ahead and strategically refinancing is important. It is ultimately your decision on how to use your money and which loans to apply for. Seeking advice from a trusted financial professional is the best and quickest way to reach your goals.
For assistance in buying or selling real estate in California, let us know!
Ironwood Properties
559-978-8884
buysellmanage@ironwoodproperties.org
DRE00776430
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Special thanks to Travis Williams of Alameda Mortgage for his knowledge and expertise! You can reach him at travis.williams@alamedamortgage.com or at 559-287-3145.
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