If you have available equity in your home and want to get cash, consolidate debt, or lower the overall effective interest rate on your total debts or lower your overall monthly debt payments, a cash-out refinance loan might be the solution you’re looking for. With cash-out refinancing, you refinance your mortgage for more than you currently owe and get cash for the difference.

Overview of Cash-Out Refinance Loans

A Cash-Out Refinance loan replaces your first mortgage with a new mortgage, and offers a choice of fixed, adjustable or fixed-period ARM loan options for the new mortgage.

Common Reasons Homeowners Refinance:

There are plenty of good reasons to refinance. Here are 5 common reasons homeowners choose to refinance :

• To lower your monthly payments
  Many homeowners refinance to lower the interest rate on their home loan and lower the monthly payment. When you decide to refinance to lower your monthly payments, make sure to calculate whether the cost of refinancing is worth the monthly payment savings.
• To change mortgage terms from adjustable to fixed rate
  For many homeowners, an adjustable rate mortgage can be a great way to purchase a home with low initial monthly payments. If you have an adjustable rate mortgage and want the stability of fixed interest rate and payments that don’t change, you may want to consider refinancing to a fixed rate mortgage.
• To move to an adjustable rate mortgage (ARM) for short-term monthly payment savings
  Maybe you chose a fixed rate mortgage when you thought you’d stay in your current home for the long term. Now, your plans have changed and you anticipate moving in couple of years. In this case, it might be a wise decision to move to a fixed-period ARM for short-term payment savings. Typically, fixed-period ARMs offer lower initial rates than fixed rate mortgages.
• To get cash out of equity
  Do you want to remodel your home? Want to consolidate debt? Whatever your reason, if you have available equity in your home, a cash-out refinance loan might be a good way to get the cash you need for whatever you need.
• To eliminate mortgage insurance
  If you purchased a home with less than 20% down, then you probably have a mortgage insurance payment along with your principal and interest. But once you reach the point when you have more than 20% equity, many homeowners can refinance to get a new loan without mortgage insurance. You may even be able to reduce your interest rate for greater long term payment savings.

Reasons to Choose A Cash-Out Refinance Loan

• 1. Higher Loan Limits than an Unsecured Loan
  The limits (the size of the loan) on a cash-out refinance loan are set by your home’s value and available equity. For many homeowners, that limit is considerably higher than would be available with an unsecured loan.
• 2. Affordable Payment Terms.
  A cash-out refinance loan can be repaid over as long as 40 years. This means that monthly payments are potentially more affordable.
• 3. Potential Tax Benefits.
  Home loans, including a cash-out refinance loan, offer the benefit that most borrowers can deduct interest expense from income for tax purposes (consult your tax advisor).