- June 11, 2021
- Posted by: Hannah Ruth
- Category: Funding trends
A cash-out refinance allows you to use the money you’ve already paid into your mortgage to cover expenses like home repairs and updates, building new additions, and even cover tuition for your college-bound student, but how does it work? Cash-out refinances work by refinancing your home to a higher amount than your existing mortgage; that difference is then paid to you, tax-free, for you to spend however you wish. Here are just a few examples of what your home’s equity can cover:
Build: Using your cash-out refinance to build an outdoor kitchen, pool, or built-in fire pit can easily transform your backyard into a luxurious outdoor entertaining space! Additionally, using your cash-out toward home improvement projects that increase the value and accessibility of your home makes your mortgage interest rate tax-deductible. Consider adding a television or projector and a soundbar to your new outdoor oasis to transform your backyard into the perfect spot for Superbowl parties and movie nights – just be sure to add a waterproof cover for your electronics.
Upgrade and Repair: Give your home a face-lift and pull it into the modern era by updating your paint colors inside and out, installing a beautiful new fence or roof, installing newer, energy-efficient appliances…the list goes on and on! Choosing to use the money from your cash-out refinance to make multiple small repairs and upgrades around your home increases the overall value of your home and significantly boosts your curb appeal. Simple changes like upgrading your landscaping in both the front and back of the house can be enough to transform the exterior of your home entirely and generally have the highest return on investment.
Tuition: The cost of tuition can be a sizeable expense and a looming financial strain for many homeowners with college-bound students. However, homeowners have a secret weapon that often goes overlooked in the form of the equity in your home. A cash-out refinance allows you to replace your existing mortgage with a new, larger mortgage while you get paid the difference upon closing. Choosing to use the equity in your home to finance your student’s tuition costs can be a great solution to fit your immediate needs but be sure you’re still able to continue working toward your long-term financial goals. Talk with your lender to discuss your concerns and compare your available mortgage options so you can choose the best option for you and your family.
Travel: It’s possible that none of the above apply to you, your home is updated, you don’t want to add any new features, and you don’t have any expenses large enough to require a cash-out, so that’s it, right? Let’s give you one last option to consider: your bucket list. Taking that once-in-a-lifetime dream vacation you always imagined, traveling to a new country, or climbing Mt. Everest, those experiences can get expensive fast. If you have enough equity in your home, using a portion of it to cover a luxury dream vacation is not the worst decision. Contact your lender to discuss current market interest rates, your mortgage options, and your financing goals to determine if a cash-out refinance makes sense for you.
As you can see, a cash-out refinance can be a powerful resource for homeowners to use to fund improvement projects around the house and cover large expenses. If you’re a homeowner with substantial equity built up, this could be an affordable way for you to borrow money. Contact me today to discuss all your available options to ensure that a cash-out refinance is the best choice to fit your financial needs.