We’ve lived in our home for 20 years or so, and we’ve never had time to do make any improvements because we were so busy raising our kids and working hard. Now that we’re slowing down a bit and the kids are grown, we think that updating the kitchen and adding on a game room would be great. However, there’s some discussion about where the money for these endeavors will come from. My husband thinks that a home equity loan is the best choice, and I think that mortgage refinancing with cash out will work better. To settle out debate, we turned to Real-estate-yogi.com.
What? You don’t know about this awesome consumer resource website? Real-estate-yogi.com is my go-to site when I need guidance about things like home improvement and the financial products available to fund it. The site is staffed by knowledgeable representatives who are available all day, every day to aid consumers in connecting to contractors and lenders. They can help us choose which option is better for what we want to do, too. Let me tell you what we learned about mortgage refinance with cash-out.
When utilizing cash-out refinance, you redraw your mortgage for more than you owe and pocket the rest of the money. What you do with it is up to you. When doing cash out Refinancing, you can get up to $100,000 back if there’s that much equity in your home and you have outstanding credit. That’s a lot of home improvements, isn’t it? According to Real-estate-yogi.com, some of the differences between this product and a home equity loan are that the equity loan is a separate loan, above your mortgage, whereas the refinance is, as I pointed out, a second mortgage. Generally, the interest rate on a cash-out refinance is lower than that of a home equity loan, and you’ll have to pay closing costs on the refinance, whereas equity loans don’t have them.
As a rule, if the interest rate you have on your current mortgage is lower than what you could by mortgage refinancing cash out, it would make more sense to get a home equity loan. Real-estate-yogi.com points out that if you’re 20 years or more into a 30-year loan, a home equity loan is also more sensible. The reason for this is that you’re paying off more principal than interest, which is the opposite of what you would do if you refinanced. With a refinance, you’re starting all over again, and that means paying lots of interest at first.
So, it seems that I was wrong about the cash-out refinance being our better bet. Yes, my husband did say “I told you so!” I’m just glad we went to Real-Estate-Yogi.com to find that out. Give them a call at 1-800-987-1397 to discover how they can assist you.