Cash out today for a better tomorrow.
With a cash-out refinance, you use the equity you’ve built up in your home to get cash for other expenses. Tapping into your home’s equity is an ideal way to get extra money, and the beauty of a cash-out refi is you can use the cash for anything you choose. You could pay off debt from high-interest credit cards or student loans, make home improvements, or even start a new business. The only limitation is your imagination.
It’s important to note that when you refinance your existing mortgage to get cash out, you’ll be subject to most of the same underwriting criteria as when you purchased your home. You may need to prove that you have a debt-to-income ratio that qualifies, or that you can afford to make higher monthly payments than you have now. In addition, you’ll likely need to provide supporting documentation that includes proof of income via W2s, 1099s, retirement statements, bank statements, and/or tax returns.
Read on to discover what a cash-out refinance is all about, and how to get started with the application process through Embrace Home Loans.
What are the benefits of a cash-out refinance?
The biggest advantage to a cash-out refinance is the obvious one — cash! Depending on how much equity you’ve built up in your home, you may be able to receive a significant amount of cash back that you can use for a variety of purposes.
For example, using funds from a cash-out refinance to pay off high-interest loans and credit accounts can help you lower your monthly payments now, and could have a major impact in the long run by decreasing the amount of interest you pay over time. You could also use the cash to pay for home repairs or renovations, which could increase the value of your home and give you even more equity in the property.
What are the costs of a cash-out refinance?
Much like if you’re simply refinancing your mortgage for a lower interest rate, there will be closing costs associated with a cash-out refinance, which on average will range between 3%-6% of the total mortgage amount. It’s important to carefully consider these closing costs when making a final decision about whether a cash-out refinance makes financial sense for you, especially if you’re:
Planning on moving in the next few years, since you may not be in the house long enough to recoup closing costs.
Paying off other debt, since your potential savings on interest payments might not be worth the cost.
Should you refinance?
Wondering if refinancing your mortgage could save you money? If today’s interest rate is lower than the rate on your current mortgage, there’s a good chance it could. Our Refinance Calculator can help you determine how much you could save and if refinancing makes financial sense.
Plug your current mortgage information into our Refinance Calculator. You can compare the total interest paid over the life of your loan — using your current interest rate versus a new lower interest rate. The calculator will also show your monthly savings and how long it will take to break even. Try out different numbers and scenarios to learn how a refinance might benefit you.
How do I know if a cash-out refinance is right for me?
If you’re using the money to pay off other debts, and the total of all your monthly payments will be reduced, then it could make sense to do a cash-out refinance. It’s also smart to take advantage of a cash-out refi if you need money for large expenses such as college tuition, because mortgage rates are often lower than rates you could get on personal or student loans. In addition, mortgage interest could be tax deductible in some cases (but you’d need to check with a tax professional regarding your specific situation).
An Embrace mortgage specialist can help find the loan that’s right for you and guide you through the entire process step-by-step. And because we do all our underwriting and processing in-house, we're able to help get you the cash you need in days, not months.
Call Embrace today at 800-333-3004 to speak with one of our knowledgeable loan officers and learn more about your refinance options. Or, fill out our easy, convenient online application, and one of our specialists will contact you as soon as possible.
Frequently asked questions
What is the difference between a cash-out refinance and a home equity line of credit (HELOC)?
With a cash-out refinance, you replace your current mortgage with a new mortgage to help with expenses such as tackling home improvements or paying off other debt. With a fixed-rate cash-out refinance, you know exactly what your rate will be and what you will pay each month.
The best option for you depends on your financial need and situation. Embrace does not offer HELOCs, but our mortgage specialists can help you decide.
What can I do with the money from a cash-out refinance?
What is the typical refinance process?
- Research the value of your home and check your credit scores.
- Gather all needed documents and apply for the refinance.
- After your loan is approved, the underwriting process begins—the time for careful review.
- Sign your papers and close your loan.
When is the right time to refinance?
- You’d like to lower your interest rate or monthly mortgage payments
- You need cash, fast
- You’d like to consolidate debt
- You’re looking to shorten your payback term
- You want to switch from a variable-rate to a fixed-rate mortgage to create regular, predictable payments
- You’d like to get a variable-rate mortgage with better terms
What is a home equity line of credit (HELOC)?
A Home Equity Line of Credit (HELOC) is a line of credit that allows you to borrow against your home equity.
HELOCs usually have a variable interest rate that changes over time. For most HELOCs you can borrow money for a specified time. During this time, known as the “draw period,” you can make multiple withdrawals and may make monthly payments. When the draw period ends, you may no longer be able to borrow money from your line of credit, and you may make monthly payments to repay your outstanding principal and interest over a period of time. During this time, known as the “repayment period,” you may not be able to borrow additional amounts.
30-Year Fixed-Rate Refinance Mortgage Example:
The payment on a $225,000 30-year fixed-rate refinance loan at 2.875% with a 70% loan-to-value (LTV) is $933.51 with 2 points due at closing. The Annual Percentage Rate (APR) is 3.13%. This assumes a FICO score of at least 701. Payment does not include taxes and insurance premiums, which will result in a higher monthly payment. Interest rates and annual percentage rates (APRs) are based on current market rates and are subject to change without notice. Rates offered may be subject to pricing add-ons related to property type, loan amount, LTV, credit score, and other variables. Mortgage insurance may be required for LTV >80%. If mortgage insurance is required, the mortgage insurance may increase the APR and the monthly payment. Stated rate may change or not be available at the time of loan commitment or lock-in.
15-Year Fixed-Rate Refinance Mortgage Example:
The payment on a $225,000 15-year fixed-rate cash-out loan at 2.625% with a 70% loan-to-value (LTV) is $1513.55 with 2 points due at closing. The Annual Percentage Rate (APR) is 3.070%. This assumes a FICO score of at least 701. Payment does not include taxes and insurance premiums, which will result in a higher monthly payment. Interest rates and annual percentage rates (APRs) are based on current market rates and are subject to change without notice. Rates offered may be subject to pricing add-ons related to property type, loan amount, LTV, credit score, and other variables. Mortgage insurance may be required for LTV >80%. If mortgage insurance is required, the mortgage insurance may increase the APR and the monthly payment. Stated rate may change or not be available at the time of loan commitment or lock-in.