Have you accrued equity in your home and would you like to pull some cash from it? The basic rule of thumb with cash-out refinancing is the more your mortgage matures, the more money you can potentially gain. Equity is the amount of a loan you have currently paid off. There are two ways to gain equity:
1. The value of your property goes up
2. You keep making your standard monthly mortgage payments as scheduled
Cash-out refinancing takes advantage of the equity you have built up. Here’s how it works. You borrow an amount that’s more than what you currently owe on your mortgage, pay off that mortgage, and keep the difference. While you are taking on a larger mortgage, you can use the extra funds to do whatever you’d like. Many people choose to pay off other debts or make property repairs.
If you have more questions about cash-out refinancing and reside in the Greater Atlanta area, contact AML today. We can help you determine whether cash-out refinancing would benefit you. If so, we’ll help you secure refinancing on the best terms possible.
If you would like to convert the equity you have in your home to cash in your pocket, cash-out refinancing isn’t your only option. You can also open a home equity line of credit (HELOC). Like cash-out refinancing, a HELOC converts the equity you have in your home into a loan you can use to finance home repairs, pay down other debt, take a vacation, or anything else. However, a HELOC functions differently than a cash-out refinance.
A HELOC is a revolving line of credit, which means it works like a credit card. You’re given a certain spending limit, which will depend on how much equity you have in your home. You can spend up to that limit, and as you pay back the loan with interest, that money is freed up for you to spend again. In contrast, a cash-out refinance is often paid to you as a lump sum. Once that money is gone, it’s gone, even if you’ve paid back the loan.
There are other differences between cash-out refinancing and HELOCs, such as how the interest rates are calculated, the fees you may be liable for, and potential tax advantages. Which one is right for your circumstances will depend on your credit score, the amount of equity you have in your home, how you intend to spend the money, and other factors. The mortgage and finance experts at AML would be happy to walk you through all your options and help you choose the financing that would work best for you.
The friendly pros at AML are ready to help you through the world of cash-out refinancing and HELOCs. Contact us today to schedule an appointment.
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ABSOLUTE MORTGAGE LENDING, LLC
1201 West Peachtree, Suite 2616
Atlanta, GA 30309
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