What Can I Use a Cash Out Loan For?
It’s 2018 and the Cash Out Refinance is returning as a great option to access the equity in your home for a number of reasons. With the increase in home values over the last few years, homeowner’s are becoming more interested in using the equity they have built up in their home to help them take care of debt, home improvements, and many other of life’s necessities that may pop up.
Since we are located in the State of Texas, we have dedicated an entire webpage to Texas Cash Out Loans. Visit the link to see a ton of information on cash out loans specifically for those of you located in Texas.
Everyone else, cash out loans are pretty straightforward. If you are doing a Conventional loan, you will be limited to 80% of the value of your home if its a 1 unit single family home, if its a 2nd home or an investment home you are limited to 75% of the value. FHA will allow you to go to 85% and VA will allow 100% financing, but only on a primary home.
The amount of equity you have available is calculated this way: Value of Home x 80% = Max Loan Amount Then subtract any current liens or mortgage against the home that will be paid off, plus any closing costs. This will equal the amount of cash you can expect to hit your bank account.
$250,000 Home Value x 80% = $200,000 Loan Amount
$200,000 – $100,000 current mortgage – $4,500 closing costs = $95,500 cash in the bank
So what can you do with your $95,500? Here are some of the most common reasons we see our clients cash out of their homes.
- Debt Consolidation – Mortgage rates tend to be much lower than high interest credit cards and loans, so paying off your debt and rolling it into your mortgage payment is a great way to save on your overall monthly payments and actually put you on a track to paying off all your debt.
- Home Improvements – Anything from small paint and upgrade projects to major renovations or much needed repairs. Your equity can be used to spruce the place up or give your home a complete makeover.
- Pay for an expensive life event – Pretty broad umbrella here, but the proceeds from a cash out refinance can be used for pretty much anything. Kids going to college, a wedding, a dream vacation and a new car are just a few big ticket items your home can help fund. I have also helped clients with medical bills, surgeries and therapists that helped improved their lives or the lives of their loved ones.
- Investment Purposes – If you have a knack for investing, using the equity in your home is a great way to access cash at a lower rate than can be made investing it properly. I recently did a cash out loan for an individual that was looking to invest in his own company and become a major shareholder. Of course use caution and make sure your new investment opportunity makes dollars and sense before putting your home’s equity at risk. Consult a financial advisor if you are new to the market.
- Buying Additional Properties – This is definitely a top 5 reason people are doing cash out loans. Whether you are looking for a 2nd home getaway on the beach or adding to your rental portfolio, leveraging your other properties is a great way to finance your next real estate deal.
If you still have questions on what to use your cash for, Contact Us Today or get a Free Quote and we can walk you through the process in accessing the cash in your home. Our goal is to get you the best rate at the lowest cost, so getting your money is easy and hassle free.
Eric Weishaar
President | NMLS# 207659