Cash-out refinancing is a tool that homeowners and real estate investors use to access their property’s equity in cash.
A cash-out refinance allows you to take out a loan of up to 80% of the property value. The loan is used to pay off the remainder of the mortgage, and the rest of the funds can be used however you wish.
If your property is valued at $280,000 and you have $60,000 left on the mortgage, you could borrow up to $184,000, pay off the mortgage, and have $124,000 to put toward improving the property, paying down higher interest debt, or anything else you need to do.
Real estate investors can use this money to make improvements that will allow them to increase the property’s income, or as a way to get the capital they need to purchase their next investment property.
What Can You Do With a Cash-Out Refi?
As long as it is a standard cash-out refinance (and not a limited cash-out refinance), the only requirement is that you pay off the remaining mortgage. What you do with the remainder of the money is entirely up to you.
In most cases, people use the money to improve their financial outlook by purchasing more real estate, consolidating debt, or making needed improvements to their property.
Is a Cash-Out Refinance Right for Me?
If you have equity and need cash, a cash-out refinance can help you achieve your goals and help you grow your wealth. It’s important that you understand the risks, rates, and terms, and have a clear reason to use the money.
While you could use the money from your home equity to buy a luxury vehicle, it’s usually not a good idea. Like all loans, cash-out refinancing is a tool that carries a certain amount of risk in order to get you the capital you need to achieve your goals.
Before pulling the trigger, do your due diligence and speak to lenders about interest rates, closing costs, and other terms before you make your decision.
How Much Money Can I Get?
The maximum you can borrow is 80% of the of the property’s value. This is called the Loan to Value (LTV) ratio. If able, you might want to make critical improvements to the property before having it appraised to increase the property’s value before applying for the loan.
The LTV is determined by your credit score, debt to income ratio, and other factors. If you are unable to verify your income or have damaged credit, a private real estate lender may be able to help.
Get the Funds You Need Today
A cash-out refinance is just one tool in every homeowner or real estate investor’s arsenal. If you have a need for some cash, you can access your property’s equity today. It’s essential to choose the right lender to get the interest rate and terms you need.
Investor’s Choice Lending offers specialized loan programs for real estate investors. We offer 30-year fixed-rate cash-out refinancing with no income verification and no seasoning on the length of ownership. Just give us a call to discuss your loan scenario today, and our experts will help secure the financing you need for your next project.