What does it mean to Refinance a home loan? Refinancing is the replacement of an existing loan with a better loan with a lower interest rate that pays off the debt of the old loan. Refinancing should help you save money, build home equity and a cheaper rate will help you pay off your loan faster. A loan might be refinanced when one you can lower your interest rate by one-half to three-quarters of a percentage point. Learn how you can have more money in your wallet. Call us today.
We offer unique programs that let you refinance up to 97% of your home’s appraised value!
Cash-Out Refinance has many benefits. The things you can do with a cash-out refinance are all good: take a dream vacation, pay off high-interest credit cards, create a college fund or begin that home renovation.
- Lower your interest rate.
- Change your terms.
- Lower your monthly payment.
- Pay off debt, make home improvements or fund large purchases.
- Eliminate monthly PMI.
- Change your loan type. Change your loan from an FHA loan to a Conventional Loan.
Enjoy having more spending money.
Enjoy having more spending money. Let’s get started.
What is a California Cash-Out Refinance?
A Cash-Out Refinance allows you to convert home equity home equity into cash by creating a new mortgage for a larger amount than what is currently owed. You receive the difference between the two loans in tax-free cash (the government does not count the money as income).
How does a California Cash-Out Refinance work?
For example, if you owe $200,000 on your home and it’s now worth $400,000. Let’s assume that refinancing your current mortgage means a lower interest rate and you decide to use the cash to renovate your home. Lenders generally require you to maintain at least 20 percent equity in your home after a cash-out refinance, so you will be able to withdraw up to $120,000 in cash (minus closing costs that range from 3% to 6%).
Your home is worth $400,000 and you can get a refinance loan for up to 80% of the value.
$400,000 x 80% = $320,000
Minus $200,000 to pay off your current loan, so $320,000 – $200,000 = $120,000
Minus Closing costs of ranging from about 3% to 6% of closing costs, let’s just use 5% for closing costs, so minus the $120,000 x 6% = $6,000
Minus the $6,000 in closing costs, so $120,000 – $6,000 = for a net cash-out of $114,000.
How can I spend the money from a Cash-Out Refinance?
Cash-Out Refinance Loans allow you to take cash out of your home equity to take care of concerns like paying off debt, auto or personal loans, credit card debt, making home improvements, make a large purchase or funding school for you or your family. Do whatever you please with the funds!
Refinance into a loan with an interest rate that is lower than your existing rate by qualifying for a lower rate based on market conditions or an improved credit score. Lower interest rates typically result in lower interest costs, which means significant savings over the life of the loan. Doesn’t that sound better?
Consolidate all debt into one single loan, this allows you to pay off high-interest credit card debt and replace it with lower-interest mortgage debt. Using a Cash-out Refinance to pay off credit card debt is also known as a debt consolidation refinance.
Did you have an increase in income? Then it might be a good time shorten your mortgage. Refinance a 30-year home loan into a 15-year home loan that comes with higher monthly payments but a lower interest rate, which allows you to pay off your mortgage faster and save a lot of money and save thousands of dollars in interest payments for the life of the loan.
Are you making less income? You can extend repayment to increase the term of the loan, which allow for a lower monthly payment, but you will pay more in interest costs, because of the extra time the loan spends accruing interest.
Sometimes budgeting is difficult and stressful when you have additional debt on top of your mortgage. For example, sometimes new business owners are not making a profit and their business loan is stressing them out, perhaps a Cash-out Refinance will help with the cash flow.
Your monthly payment will decrease as a result of a lower interest rate or extending the term of the loan. Now your cashflow outcome will be healthier and you can start budgeting differently.
Perhaps you have an variable rate mortgage, which fluctuates, but you prefer predictable monthly payments. Then it could be a great time to switch to a fixed rate loan.