In the face of the coronavirus pandemic, millions of homeowners are looking at every avenue to get money. The economy’s slippery slope drained many bank accounts, leaving millions of consumers wondering what now? How will you get the money you need?
If you’re one of them – wondering where your emergency funds will come from should you need them, you may consider a cash-out refinance and for excellent reason. Refinance rates are low – a lot lower than traditional consumer rates.
But is a cash-out refinance the right choice for you?
Let’s look at the specifics.
Do you Have Equity?
You need equity to pull money from your home. Equity is the difference between your home’s current value and your current mortgage balance. It’s the cash balance that sits idle in your home right now.
Let’s say you have a $200,000 mortgage and your home is worth $400,000 today. You have $200,000 in equity. You won’t be able to withdraw all of that, only a portion, but at least you know where you stand. Just how much you can borrow compared to the home’s value depends on the situation.
Normally, homeowners can borrow up to 80% of their home’s value. In the case above, that means up to $320,000 minus the $200,000 outstanding mortgage. Today those numbers might be a little lower depending on your qualifications, though.
Do you Need an Emergency Fund?
As much as 30 percent of Americans don’t have an emergency fund set aside. An emergency fund should protect you in the face of an emergency. It should have at least 3 to 6 months of expenses in it. If you don’t have that, your home’s equity may be the perfect place to get it.
With today’s low rates, you can tap into your equity, taking out what you need, while paying reasonable rates. Whether you take out a home equity line of credit or refinance your first mortgage with a cash-out refinance, you get your equity out.
Do you Have Consumer Debt?
If you have consumer debt and are trying to find areas to save, you can consolidate your consumer debt with your home’s equity. Chances are that you’ll get a much lower interest rate, which is where you’ll save the money. You can get yourself out of high-interest debt, putting more money in your pocket just by refinancing.
Should you Refinance?
Let us help you look at your refinancing options. A cash-out refinance involves refinancing your first mortgage, but a home equity line of credit or home equity loan is a second mortgage, separate from your first mortgage.
We’ll go over your options, so you can see which makes the most financial sense now to help you in the face of the pandemic as well as in the future. Your mortgage is one of the largest investments you’ll make, but we are here to help you through it.
