In part one of this two-part blog series, we went over some of the basics on cash-out refinancing and what makes it different from other refinancing formats. Cash-out refinancing, which involves the borrower being paid actual cash based on their accrued equity in the home, allows many borrowers to improve other areas of their finances or supplement their home purchase in important ways.
At Altius Mortgage and our partners at Mortgage Ogden, mortgage refinancing is one of our many specialties. We offer several different refinancing formats to meet your needs, including cash-out refinancing for those looking to capitalize on their equity. In today’s part two, we’ll go over several of the common reasons why homeowners choose to go with cash-out refinancing, plus some general tips if you choose to go down any of these roads.
The most common use of a cash-out refinance among homeowners is to help pay down or consolidate debts in other financial areas. If you’ve build up significant credit card debt, for instance, but also have good equity in your home, you might perform a cash-out refinance to obtain the funds to pay down this credit card balance and stop interest from accruing.
Now, as we noted in part one of this series, this kind of thing must be approached carefully. Cash-out refinancing should not be viewed as a “bailout” of any kind, where one can simply overspend and get out of it later on. Rather, it should be one part of a larger overall plan to improve your finances, one that also includes better debt practices in the future so you don’t end up in the same situation all over again.
Another common choice for homeowners is to use a cash-out refinance to help fund various home improvement, renovation or repair projects. Such projects are often done to not only improve the space, but also increase home value as well – kitchen and bathroom remodels are good examples here.
If you do choose to use a cash-out refinance for home improvements of any kind, there’s a good chance you’ll also be eligible for tax benefits. In most cases, such improvements can be directly deducted from mortgage interest amounts.
New Car Purchase
Finally, some may use the cash-out refinance to bolster their funds for a significant purchase, such as a new vehicle. In fact, there are certain cases where you can get a better long-term deal for your vehicle than if you had gone the route of a traditional car loan, depending on how interest rates sit in both markets at the time when you’re considering this purchase.
For more on the common uses of a cash-out refinance, or to learn about any of our mortgage rates or options, speak to the staff at Altius Mortgage today.