You’ve found your dream home, but it needs some love, but how do you fund these home renovation projects? Instead of taking out a lump sum loan or adding on more debt, you can now consider tapping into your home’s equity and get cash in hand in 45 days through a cash-out refinance.See If You Qualify For A Cash-Out Refi
From a DIY Home Project to Professional Home Makeover, You Can Use Cash-Out Refinancing to Fund Your Home Renovation Project
We all get inspired by the hundreds of home renovation shows on Netflix, Hulu, and other streaming platforms, but we always wonder how they get the money to fund these home projects. Cash-out refinancing is the best way to get those home renovations done around the house. So how does it work? When you decide to go in for a cash-out refinance, you’ll refinance your mortgage for more than you currently owe and receive the difference in cash.
So, let’s talk about home equity. When you hear “tap into your home equity,” they mean the less money you owe on your mortgage, the more you”ll receive from a cash-out refinance.
How Is a Cash-Out Refinance Calculated?
If you bought your home for $350,000 and believe it’s now worth $400,00 and you’ve paid off $250,000 on your mortgage, you would subtract that from the value of your home, which would mean you have $150,000 in equity. You wouldn’t get the total $150,000 in cash, but you could get a high percentage of that once you’ve put some towards your refinance and closing costs.
You’re Ready to Start Your Home Renovations, But Will You Qualify for Cash-Out Refinancing?
If you’re considering a cash-out refinance, here are some things to consider and research:
- How much equity is in your home?
Subtract the amount you still owe on your mortgage from the current market value of your home.
- What’s your credit score?
In most cases, lenders will require that you have at least a 620 credit score, lenders requirements will vary depending on unit type and how much cash you’re looking to borrow.
- What’s your current DTI—your debt-to-income ratio?
Debt-to-income ratio is the percentage of your gross monthly income used to pay your monthly debt and determines your borrowing risk. You can find out your DTI by adding up your monthly bills, which may include: Monthly rent or house payments; divide the total by your gross monthly income, which is your income before taxes. The lower your DTI, the better.
Everything Looks Good, and You’re Ready to Tap Into Your Home’s Equity. Let’s Take a Quick Look at a Few Perks of Cash-Out Refinancing
Not only can you get cash in hand, but cash-out refinancing can benefit you in other ways.
Better and Lower Interest Rates
Home renovations can come at a cost, and if you’re looking to charge the fee to your credit card, be ready to pay on a high-interest rate, typically 23.77% or higher. With a cash-out refi, you can borrow your funds at a much lower interest rate and keep that credit card debt at bay.
Home Renovations Will Get Finished Sooner Rather Than Later
Typically if you didn’t charge it, you’d slowly finish your home renovations by tapping into your monthly budget. With a cash-out refi, you will get the lump sum upfront so you can complete your home renovation sooner than anticipated.
Skyrocket Your Home’s Value
You’re already on the road to those much-needed house renovations, and if you’re lucky, you could come out ahead long-term if you decide to sell your home, buyers will likely pay significantly more for your house. (Thank you, cash-refi!)
Cash-Out Refinance Can Get Your Foot in the Door
You have an idea of what you want, and now it’s time to decide if a cash-out refi is for you. Not only can you get those home renovations knocked out, but you can use that cash-out refinance to put in other places like debt consolidation, your children’s college tuition, etc. If you’ve owned your home for a while, your home’s equity has been hidden in plain sight the entire time, and now you can utilize it for whatever needs you may have. Consider a cash-out refinance as a treasure buried in your backyard. Need help? Try RateSimple.
- Stop putting off much-needed home renovation projects because of finances.
- Cash-out refinancing could pay for your home renovations and boost your home’s value.
- Use RateSimple to see who can offer you the best cash-out refinancing options.