The Pros and Cons of Atlanta Cash Out on a Refinance

The pressure of coping with debt can put a strain on your finances, sense of well-being and plans for the future. If you are struggling with debt, you may be considering refinancing your mortgage. But with so many options, it can be difficult to determine which one to choose. A popular solution is to use an Atlanta cash out on a refinance. The experienced mortgage experts at BrightPath will utilize their knowledge and resources to determine if a cash-out refinance is the best choice for you.

What Does it Mean to Cash Out on a Refinance?

When you do an Atlanta cash out on a refinance, you receive a loan amount that is higher than your current mortgage. The amount you are given is the difference between the property value versus the balance of the mortgage. By getting this equity out of your house, you are given cash that can be used for many purposes including paying off debt, home renovation or making other purchases that won’t incur new debt. It is important to note you can’t take out the full value of your home, which is necessary to ensure you will never owe more than your property is worth.

While cashing out on a refinance can seem like an ideal solution, it is important to weigh the pros and cons before deciding if this is the right option for you.

The Pros to Atlanta Cash Out on a Refinance

Leveraging your home equity through cashing out on a refinance can be beneficial for many reasons.

• Consolidating your debt. By using this cash to pay off your debt, you improve your credit score and debt-to-income ratio. You can also use this money to make other important life investments.

• Getting a lower interest rate. As opposed to home equity loans or other lines of credit, there are lower interest rates associated with cashing out on a refinance. This could potentially lower your home interest rate if the mortgage rates were higher when you originally purchased your property.

• Receiving tax benefits. When cashing out on a refinance, you are eligible to receive mortgage interest deductions. According to Investopedia, a mortgage interest deduction allows you to deduct the interest on any loan that is used for building and home improvement purchases, which can increase the value of your property.

• Switching from an adjustable to a fixed rate mortgage. While an adjustable mortgage can be the best solution when you first purchase your home, you may find that over time the stability of a fixed rate mortgage can better serve your needs. When you cash out on a refinance, you’re given the opportunity to make this switch.

The Cons to Cashing out on a Refinance

While there are many advantages to cashing out on a refinance, there can also be some disadvantages worth considering.

• Paying a higher interest rate. You will have to pay interest on the full mortgage amount, which could significantly drive up the cost.

• Additional fees and closing costs. The closing costs can be anywhere from two to five percent of the mortgage. It is important to calculate if these expenditures are worth the savings.

• Paying for private mortgage insurance. If you cash out on a refinance that is more than eighty percent of your property value, then you will be obligated to pay for private mortgage insurance, which protects the lender if you miss your payments.

• Risk of foreclosure. When you cash out on a refinance, your home is used as collateral. So, if you default on the payments, you could potentially lose your house.

Work with BrightPath to Decide if Cashing Out on a Refinance is Right for You

There are many opportunities and obstacles associated with cashing out on a refinance. It is important to take all of these factors into consideration to make an informed decision. Contact the mortgage experts at BrightPath today to determine if cashing out on a refinance is right for you. When you work with BrightPath, you are guaranteed to find solutions that meet your needs and your budget.