If you have equity in your home, there are many ways to put it to work. One of the best is a cash out refinance. With this, you refinance your mortgage for more than your current balance. The difference is wired to your bank account for you to use however you want.
Should the time come to learn more about a cash out refinance, the best place to start is your current lender. And of course, as time allows, compare what they offer to three to five other lenders. This will ensure that you get the best deal.
Another important point is how you plan on using the funds from a cash out refinance. Here are five of the most common options.
1. Home renovation project
What better way to improve your home and add value than by using the equity that you already have in your home? Home renovation projects take on many forms, from a kitchen overhaul to a bathroom upgrade to a new roof and windows.
2. Continuing education
If you’re going to invest in something, it might as well be yourself. Use the equity in your home to continue your education, such as by enrolling at a local community college or taking courses online. The funds you receive can be used for tuition, books, a new computer, school supplies, and more.
3. Debt consolidation
The more debts you have the more challenging they are to manage. And that’s why you need to consolidate them if the opportunity presents itself. A cash out refinance allows you to put all of your debts — or most of your debts — under one roof.
This helps you more efficiently manage your debt, save money on interest charges, and improve your credit score.
4. A second home
Depending on how much equity you have in your home, you may be able to use the funds from a cash out refinance to purchase a second property. It may be a home that you purchase and rent. A home that you flip for a profit. Or perhaps even a vacation home.
Are you getting married in the near future? How about an adult child? Either way, you know that the wedding will be expensive. A cash out refinance allows you to comfortably pay for all wedding-related expenses. This makes it easier to enjoy the process and the big day.
If you qualify for a cash out refinance, it never hurts to learn more about the process and what you get in return. Once you have a clear idea of how it works and the benefits, you can decide if now’s the time to take action.
Do you have any experience with a cash out refinance? Were you happy with your decision?