How a cash out refinance mortgage could benefit you
Did you know you can cash in on all that equity you have earned in your home? You can take advantage of that equity through a cash out refinance, and potentially save money in the process.
We know that navigating the refinancing process can be confusing — especially if you have never done it before and are not sure how it can benefit you.
But that is where Penn Street Mortgage can help. We are here to answer all of your questions and guide you through the mortgage refinance process with the goal of helping you make the smart financial choice.
Like most things in life, the key to refinancing is picking the right time and mortgage loan. Is now the right time to cash out your home’s equity? Keep reading to learn more!
What is Cash-Out Refinancing?
If you are looking to refinance your mortgage, one of the popular refinance products available is a cash out refinance.
This is a type of mortgage refinancing that allows homeowners to replace their existing mortgage with a new, larger loan. But then the loan amount difference is paid out to the homeowner in cash.
Homeowners like this option because they can take advantage of the equity they have acquired over the original loan term, which can be used for things like home improvement projects, debt consolidation, investments, or emergency expenses.
For example, if your home is worth $300,000 and you still owe $150,000 on your mortgage, your mortgage lender could refinance the mortgage for $200,000. Then, you would pay off the existing $150,000 home loan and pocket the remaining $50,000 in cash.
With the recent increase in home prices across the country, this option is a great way to use your home equity to your advantage and potentially lower your monthly payment.
Advantages of a Cash Out Mortgage Refinance
At Penn Street Mortgage, we can help you determine if – or when – refinancing your mortgage through a cash out refinance is right for you. Here are some of the common benefits we see for clients going through a refinancing:
Lower Interest Rates
Depending on the current market rates and what your current interest rate is, a cash out or refinance loan can help you lower your monthly payments and take advantage of lower interest rates.
Home Improvement Projects
Are you dreaming of renovating your home? Many homeowners use the cash from a refinance to reinvest the money in their home through home improvement projects that help increase the overall property value and improve your living space.
Debt Consolidation for Monthly Mortgage Payment
You can use the funds from the refinancing process to pay off high-interest debts, which can help you simplify your monthly payments and save on interest fees. This can help you improve your credit score and overall financial standing.
Tax Deductibility
Did you know that the interest paid on mortgage refinancing is sometimes tax-deductible? At Penn Street Mortgage, we can help you determine the best way to take advantage of this tax law and save money in the process.
Disadvantages of Cash-Out Refinancing
We believe in being fully transparent so you can make the best financial decision for you! So, let’s also talk about some disadvantages of a cash out refinancing.
Larger Home Loan Balance even with a Lower Monthly Payment
When you take out a larger mortgage loan, you’ll be increasing your overall loan amount – which means it can take longer to pay off your mortgage.
Closing Costs
Refinancing a mortgage often comes with typical closing costs and fees, ranging from 2% to 6% of the loan amount. Depending on how much equity you have in your home, having to pay closing costs might not make a big difference in the long run.
Market Risks
Sometimes, if a property value declines, you could potentially end up owing more than your home is worth – a situation known as being “underwater” on your mortgage. While this is a risk whenever you buy a home, we’ll help
Best Practices for Cash-Out Refinancing
If you are considering refinancing or are looking to see if replacing your existing loan makes sense for your financial situation, consider these tips and tricks.
Set Clear Goals: Identify why you want to refinance and outline exactly how the cash you get from your equity will be used. This can help you avoid unnecessary borrowing or using the funds for non-essential expenses that might not make sense.
Review Your Finances: It is important to have a really clear picture of your current financial situation, including your income, debts, and credit score, to ensure you can comfortably afford any changes to your monthly payment.
Do the Math: Calculate the break-even point, which is the point where the savings from refinancing outweigh the costs. This can help you determine whether cash-out refinancing is worthwhile in the long run or help you figure out which refinancing options make more sense for the current lender.
Consult Professionals: As always, talk to a mortgage advisor like Penn Street Mortgage to get personalized advice on your current loan amount and understand the implications a refinance might have on your finances.
Refinancing might not make sense for everyone, but we can provide you a loan estimate that outlines exactly how much your new mortgage would be – including any closing costs – so you have a full picture of the costs associated with home loans.
Let Penn Street Mortgage refinance your home loan today.
Whether you are looking to adjust your monthly mortgage payment or are hoping to take out mortgage loans, take advantage of a lower interest rate, Penn Street Mortgage can help answer your questions and explore which loan program is best for you.
We have been helping homeowners capitalize on lower refinance rates and refinance their existing mortgage, getting their mortgage rates for them a lower monthly payment and tapping into their home’s equity.
If you are unsure where to start or need more guidance on how refinancing can benefit you, give us a call. Our team of professional mortgage brokers and advisors at Penn Street Mortgage is here to help you make the best decisions for your financial future!
Refinance Mortgage in West Chester PA
Are you considering a mortgage refinance? If your existing mortgage is not working for you anymore, or you are interested in taking advantage of the equity you have built up in your home, going through the refinance process could be a great financial tool for you to leverage.
Here are some frequently asked questions about how to get the best mortgage through a refinance.
FREQUENTLY ASKED QUESTIONS
Simply put, refinancing your mortgage means replacing your existing mortgage with a new mortgage loan. Usually, this is a good option for homeowners who are looking to save money with a lower interest rate or want to lower their monthly payments. This also can allow homeowners to tap into the equity they have established in their homes and use it for other purposes.
It is hard to say whether going through a refinance is a good idea, but that is what we are here for as your mortgage brokers! We can help you walk through the pros and cons and explore how current mortgage rates might change your monthly payments. If you have recently lowered your credit score or are looking to switch from an adjustable-rate mortgage to conventional loans, there could be a great opportunity to explore what loan programs are best for you.
You should consider things like market trends, interest rates, and refinance rates to make the decision with the help of a mortgage company like Penn Street Mortgage. When you work with our team, we will sit down with you to explore your options and lay out the refinance home loan process so you understand exactly what your options are.
Just like everything in life, it is important to understand the pros and cons of a major financial situation like going through a refinance on your existing mortgage loan. One thing that can deter homeowners from going through the process is the associated fees. Similar to when you first bought your home, there are closing costs associated with refinancing that can add up.
Additionally, when you refinance your home, your loan term changes and can extend the life of the loan depending on the loan terms you are going with. Make sure you also check to see if there are any penalties for refinancing your home based on the original loan program you went with.
These are all things our team of experienced mortgage brokers at Penn Street Mortgage can outline for you so you understand the nuances and potential disadvantages that come with the entire process.
A financial advisor offers guidance on a wide variety of financial situations like your savings, investing, retirement planning, and sometimes, advice on mortgages.
However, a mortgage advisor or mortgage broker like the team at Penn Street Mortgage specializes only in home loans. We are experts at the home buying and home loan process and understand the unique needs that come with each client. We will present the best home loan or refinance options from our network of mortgage lenders.
Ultimately, a mortgage broker or mortgage advisor is a real estate expert when it comes to the housing market and has expert real estate experience that a basic financial advisor cannot offer.
Typically, refinancing a mortgage can take 30 to 45 days, similar to when you got the original mortgage. Remember, the mortgage process is complex and involves a lot of paperwork and communication. At Penn Street Mortgage, we will work diligently to communicate clearly and efficiently, providing you with excellent service and getting you the best deal for your refinance in Chester County.
If your home has significant equity, meaning its market value is much higher than what you owe on it, you can go through a cash-out refinance to tap into your home equity for your own purposes. It could be a large expense like home renovation, tuition fees, or debt consolidation. Whatever it might be, a cash-out refinance is a popular mortgage option.
With this process, you will get a new mortgage for more than what you currently owe. Then, the difference is handed to you in cash, which you can use however you need. Just remember that this increases your loan amount, which can affect your monthly payments.
Yes, refinancing often involves changing the length of your loan. You might choose to shorten your loan term for example, from 30 years to 15 years. Or, you could lengthen it depending on your financial circumstances and goals. Your mortgage lender can explain how getting a mortgage refinance can change your loan duration and what to consider with your unique mortgage situation.
Going through a mortgage refinance will almost always change your monthly payment amount. This is because you are replacing one loan for another in the hopes of getting a better interest rate or changing the loan type. When you do this, you will get a new monthly mortgage payment amount and begin paying that on a regular basis according to the terms of the new mortgage.
Let the team at Penn Street Mortgage be your local mortgage broker for all your refinancing needs. Our West Chester, PA, mortgage brokers are here to advise you and get you the best deal possible. Whether you have a conventional loan or are looking to get a fixed rate mortgage, we will find you the most competitive rates and provide excellent service along the way. We are here to make your mortgage refinance a straightforward process.
Head to our mortgage calculator on our website and see how a refinance will affect your West Chester mortgage. Give us a call or reach out if you have questions about the process.