Cash Out Mortgage Refinance Advice Given In a New Article from LoanLove.com

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A new guide from Loan Love helps borrowers to better understand cash out refinances.

LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. In order to familiarize their readers with the many loan options that are currently available, Loan Love is continuously updated with new guides and informational articles. A recent article from the loan borrower advice website takes a look at cash out mortgage refinance loans and how borrowers can take advantage of them.

The article explains that, in the past, the ultimate goal of homeownership was usually to pay off the mortgage as quickly as possible so that the owner would be able to live in their house free and clear. However, this has changed over the past few decades, and most homeowners may not have the same mindset of generations past. This is primarily because tax laws make it more advantageous to have a mortgage, as they allow the homeowner to deduct the interest on the mortgage. Once they pay off their mortgage they will no longer have this benefit. However, one of the biggest reasons that many have changed their mindsets is because it is now easier than ever to tap into equity that has been built up in a home, something that was difficult to do a while back. Now, homeowners have access to equity loans, lines of credit and, of course, cash out refinances which allow them to use this equity to their advantage.

Loan Love says in their article: “So just what is a cash out refinance? The concept is actually pretty simple: As you pay off your mortgage – and if your home increases in value, as most homes tend to do in “normal” housing markets – eventually, you’ll have a significant gap between what you owe on your home and what it’s worth; that’s the equity that’s freed up in a cash-out refinance. A cash-out refinance lets you refinance the terms of your loan and place a new and bigger mortgage on it, enabling you to have access to that equity. For instance, say you have a mortgage of $150,000 remaining on your home. Over time, the value of your home has increased to $250,000. That $100,000 difference is the equity you have in your home, and thanks to the cash-out refinance, it could be burning a hole in your pocket in just a few weeks.”

Of course, the borrower will not usually have access to the whole amount of the equity. Usually, they will be limited to a LTV (loan-to-value) ratio of around eighty percent. Some lenders will allow up to 90%, but usually at a higher interest rate and points, as well as having the borrower pay private mortgage insurance (PMI). But despite the limitations, there are many reasons a borrower might want to cash out. As per the Loan Love article, reasons to use a cash out refinance loan may include:

  •     “Pay for college tuition for your kids or yourself
  •     Afford that wedding of your dreams – or your child’s dreams
  •     Get those renovations done on your home – and increase your equity all over again in the process
  •     Buy an investment property
  •     Start a new business and thumb your nose at your corporate gig”

As the article states: “No matter what the reason, that equity is your money. Why keep it locked up in your house? A cash-out refinance means you can access that value and still save money by taking advantage of today’s low rates.” For more information on cash out mortgage refinance loans, please visit LoanLove.com.

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Kevin Blue
Loan Love
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