If you badly need some cash to pay off your bills, make renovations to your house, or perhaps replace your old car, you could consider a cash-out refinance. When you avail of this, you could pay a lower interest rate than your existing mortgage. However, the amount you could get from refinancing would greatly vary on some very crucial factors.
Your Home Equity and Refinance Percentage
This is the difference between your home’s value and the amount you still owe on it. If you have been residing in your home for quite some time now, you’re probably thinking that you have ample equity. However, dropping home values could lower your equity. Basically, your home equity doesn’t depend on the amount you have already paid, but the worth of your home.
Your mortgage lender might get a home appraiser to figure out the value of your home, or you could also check out the recent purchase prices of homes in your neighborhood. Check houses that are similar to yours to estimate how much your home is really worth.
Mortgage lenders typically limit a house’s value based on the amount that they’re looking to refinance, says a mortgage officer in Fort Myers. According to Primary Residential Mortgage, Inc. Fort Myers, some lenders might lend 80 percent of the appraised home value, yet others might only go for 70 percent.
For example, if the value of your home is $300,000 and you have an outstanding balance of $200,000, your home equity is $100,000. If your mortgage lender allows you to refinance up to 80% of your home’s worth, you could get $40,000 in cash at most.
Main Things to Remember and Consider
Put simply, the answer to the question, “How much money could I get from a cash-out refinance?” would depend mainly on the amount of equity you have in your home and the specific terms of your mortgage lender. However, it’s critical to note that no matter how much you get from cash-out refinancing, you need to make certain that you could pay it off in time.