Everything You Need To Know About A Cash-Out Refinance

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Troy Reichert

Troy Reichert is the owner of Reichert Mortgage LLC. With over 20 years of serving the United States Airforce, Troy wants to continue to give back to the community by helping give people their best chance at securing a home.

At Reichert Mortgage Team, we believe in providing top-tier service to the community of Colorado Springs. We are a veteran-owned mortgage company that is proud to find you the best loans and deals possible to secure the home that you have always wanted. One of our goals is to educate our clients and find what works for their unique situation, so that they can feel financially confident with their decision.

Our team of mortgage experts helps our clients with whatever homeowner queries they may have, including cash-out refinances. If you currently have a high monthly mortgage payment, are in need of a home renovation or are looking for ways to save money, then a cash-out refinance may be the best option for you.

What Is A Cash-Out Refinance?

During the process of a cash-out refinance, an old mortgage is replaced with a new mortgage. The new mortgage is for a larger amount of money than what was previously owed on the old mortgage loan. The difference between the two loans is paid to the homeowner in cash. This unique refinancing option helps homeowners use their home mortgages to obtain cash.

Cash-Out Refinance Benefits

As your mortgage matures, your home increases in equity. Every time you make a payment towards your mortgage, your home goes up in value. The biggest advantage of a cash-out refinance is that unlike taking out a second mortgage, you are not increasing your debt or monthly bills.

Cash-out refinances usually result in lower interest rates for the borrowers. This is a great option to take advantage of when you notice that rates are especially low. For example, during COVID-19, interest rates are at a record low and present a great opportunity for residents to come into cash at a time that they are in need.

There are also potential tax benefits to refinancing your home using the cash-out refinance option. If you use the money for a substantial home improvement, you may be eligible for a tax break that reduces the cost of your loan. You can also reap the benefits of a longer repayment period. When you replace your home mortgage with a new 30-year or 15-year loan, you can stretch out how long you have to make payments.

Cash-Out Refinance Requirements

A lender will take into consideration your credit score, finances and property history to evaluate your cash-out refinance eligibility. Even though each lender and loan is different, there are general guidelines that most lenders abide by.

  • A credit score of at least 620.
  • Verification of your income and employment.
  • An appraisal to verify your home’s value.
  • At least 20 percent equity in your home.
  • A debt-to-income ratio of 43 percent or less.
  • A loan-to-value ratio that is no more than 80 percent.

Cash-Out Refinance Uses

Although most people believe that the money accrued from a cash-out refinance must be used towards your home, that is not true. There may be advantages to using the cash towards your home, but you have the freedom to use the cash on whatever you please. Whether it is a home improvement project, medical bills or an unexpected car repair, you can spend your money on anything you need.

Your Friendly Neighborhood Mortgage Experts

If you are looking for a mortgage company that is on your side and can help you with any and all mortgage-related situations, then look no further! The mortgage experts at Reichert Mortgage Team possess the education and experience to find you the best solution possible. If you have any questions about mortgages, cash-out refinances or want to discuss if a cash-out refinance is a good option for you, please contact us today. We are eager to help turn your house into a home.

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