Cash Out Refinance
For borrowers seeking home improvements or who want to cover major expenses like college tuition or medical bills, a cash-out refinance might prove the ideal loan.

Let’s break it down…

In addition to monetizing a portion of the equity of your home, this loan represents the refinance of your current mortgage. Bear in mind that in many cases the balance on the new loan will be higher than the balance on the loan you are currently paying off. Also, there are restrictions on how much equity you can take out based upon the loan program you choose. For most conventional cash-out refinance loans, you are permitted to pull out up to 80% of the value of your home. On other loans, such as VA loans, you may be able to go even higher. To illustrate this loan in action, let’s say your home is worth $250,000 and you have a current mortgage of $143,000. You would be able to take out a new loan for $200,000 (80% of $250,000) and you would receive proceeds of $57,000 minus any closing costs. There are also times when a borrower might do a cash-out refinance and not receive any actual cash. For example, let’s say you have a $150,000 first mortgage that you used to purchase the property and later took out a $50,000 HELOC to do some renovations. You could combine those two loans into one new loan at $200,000. If you are pulling equity out to pay off debt – a common scenario – the goal would be that the total payment of the new loan is less than the sum of the debt you are paying off. While cash in hand sounds like a great idea, bear in mind that interest rates on cash-out refinance loans are typically higher than their rate-and-term counterparts due to loan adjustments from Fannie Mae and Freddie Mac. There are many pros and cons to a cash-out refinance, so it is important to discuss this option with your trusted Mortgage Atlanta loan specialist to determine whether this is the right refinance loan for you.
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