If your savings are diminishing and you need a little extra cash, you might be considering freelancing or picking up a second job. However, if you are a homeowner, you can utilize your equity and put money in your pocket with a cash out refinance. Are you unfamiliar with the refinancing process and questioning if it is the best move? Mortgage companies in Texas have outlined the expected earnings, costs, and best uses of a cash out refinance to help you evaluate if it is the right choice for you.
At BrightPath, our loan officers will use their knowledge and experience to get you the refinance you need.
What is a Cash Out Refinance?
According to mortgage companies in Texas, a cash out refinance enables you to upgrade your current mortgage to a new loan. The value of this new loan is higher than that of your existing mortgage. The difference in these amounts is given to you in cash that can be used to build your savings, pay off debt, or make smart investments in your future.
How to Calculate the Amount You Will Receive from Your Cash Out Refinance?
To estimate the amount that you will receive from your cash out refinance, you need to know your mortgage balance, current home value, and retained equity requirements. Your lender will review a home appraisal to determine the value of your home. Depending on their requirements, they will allow you to borrow up to 80% of your home equity. The remaining percentage cannot be borrowed and is referred to as your retained equity. Once you receive the borrowing amount from your lender, subtract this number from the amount that is still owed on your existing mortgage to calculate the amount you will receive from your cash out refinance.
Evaluating the Closing Costs
While a cash out refinance may be an attractive option to help you build your savings, mortgage companies in Texas recommend that you review the closing costs to ensure it makes financial sense for you. While closing costs can fluctuate due to factors including your location, the price of your home, and the lender you work with, you should anticipate that they will be 2%-6% of your new loan amount. These costs include the origination fee, title insurance, credit check, home appraisal, title search, notary fee, recording fee, and more. In some instances, you may qualify for a no-closing cost refinance. Reach out to mortgage companies in Texas to learn additional information and see if you are eligible to apply.
Is a Refinance Right for You?
As reported by mortgage companies in Texas, you should seek out a cash out refinance in one of the following circumstances.
- Update your loan terms. When you signed the loan to get into your home, you may have gotten an adjustable rate mortgage for its lower introductory rates. However, if you plan on living in your home for an extended period, a cash out refinance enables you to update your loan terms so you can enjoy the stability of a fixed rate mortgage. These reliable payments allow you to better budget, build your savings, and plan for the future.
- Reduce your interest rate. As mortgage companies in Texas will tell you, interest rates are prone to frequent fluctuations. If the interest rates have dropped since you signed up for your existing mortgage, you should get a cash out refinance to take advantage of the reduced interest rate. This has the potential to save you thousands of dollars over time.
Build a Brighter Future with a Cash Out Refinance
By getting a cash out refinance, you can utilize the value of your home to enhance your savings and invest in a better future. Work with the loan officers at BrightPath today to start the refinancing process.
To learn more information about a cash out refinance and schedule a consultation, contact us today.
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