If you are looking to pull some money from your home and tap into the equity of your home then you are presented with the 2017 Cash-Out Refinance Or Home Equity Loan question that you will need to answer. With a lot of the borrowing public having interest rates at 4.5% or less, then you would probably wonder why you would want to cash-out refinance and get the same interest rate and absorb the costs associated with it? Well the answer could possibly be that it is still the most cost-effective way to pull money against the equity in your home. When trying to determine a 2017 Cash-Out Refinance Or Home Equity Loan, you have to answer the following questions in order to get to your answer:
– How much equity do you have?
– How much money are you looking to obtain?
– How long do you anticipate needed to repay this loan?
– How much are you going to risk in order to get this done?
If you are looking to get a large sum of money from your equity, then it is almost always a cheaper for you to complete a cash-out refinance. You can look at this scenario as the more money you need, the more a cash-out refinance works to your favor. Let’s take an example of Borrower A with a home worth $400,000 and only $100,000 owed on it. The borrower wants to pull $100,000 out of the property for some major projects and the options you have would be as follows:
– Cash Out Refinance: There would now be $200,000 owed at 4% and a payment of $955
– Home Equity Loan: There is an existing $100,000 loan at 4% and now $100,000 on a 15-year note at 7.50%. Given this, the payment would be $1,215 or an additional $260 per month.
Now if we take a look at the reverse of this scenario and the borrower would like only $25,000 for some minor projects to be done around the home, the short-term answer would be it is more expensive than refinancing over a 30-year term. If you factor in that this loan will be paid off in 15 years, there is actually a savings in the interest that is paid on this money even if the going home equity loan rate is 7.5%. Yes, your payment is an extra $60 per month, but after 15 years this debt is gone unlike the cash-out refinance option that makes you pay on this money for the length of the loan.
If you haven’t read my article regarding FHA MIP Decreasing, you will see that the current MIP on FHA Loans is set to decrease from 0.85% to 0.60% or a reduction in 25 points. Seeing that this would save in a monthly payment, you have a tangible benefit to completing a refinance and you can also cash-out at the same time. However, you will need to be aware that with a “new” FHA Loan, you will be required to have another 1.75% up-front mortgage insurance recorded, however, this can be rolled into your new loan.
No matter if your project is big or small, you should reach out today so that we can go over all your options with you to get access to the equity in your home immediately. Mortgage Rates are decreasing finally and now may be a good time to jump back into the market and get that cash you have been wanting for those necessary projects. We are available to you any time day or night, weekends, and holidays. If you call or email, we will be here to serve you. Call today at 888-900-1020 or email firstname.lastname@example.org.