How to take Cash-Out or Consolidate Debt Using Your Home
If you need cash for a major expense, a cash-out refinance lets you use your home’s value- sort of like a piggy bank. For borrowers who have the right financial discipline, cash-out refinances can be a useful tool to pay off higher-interest short-term debts, or to use the cash for whatever you need.
With property values on the rise in many markets and/or if you have paid your mortgage balance down over time, chances are you could be living inside a pile of cash, otherwise known as 'equity.' Equity is a term that refers to the difference between how much your property is worth and how much you owe on the mortgage.
If you’re a homeowner who needs a large sum of cash to subsidize a major purchase or pay off debt, a cash-out refinance with Sierra Pacific Mortgage, may be right for you.
What is a Cash-out Refinance?
When a borrower performs a cash-out refinance, they take out a new loan from a lender, for an amount greater than their current mortgage balance. Part of the new loan will be used to pay off the existing mortgage, and the borrower receives the rest as a one-time lump sum cash payment at closing.
The borrower is then free to use the remaining money for whatever they want: home improvements, medical bills, college tuition, credit card bills or other large purchases.
The new loan from Sierra Pacific Mortgage could be a fixed-rate loan, for 30-, 25-, 20-, 15-, or even 10-years, with a competitive market interest rate.
How Cash-out Refinancing Works
For example, let's say you just recently updated your outdated kitchen. The upfront expenses were costly, but the value of the renovations will likely boost the value of your home- and help you rebuild your equity, making it a good investment for the long term.
You purchased all the supplies using your local hardware credit card promotion offer with 0% interest for 6 months, but it is soon expiring- and you know paying the card's 24.99% interest rate after the promotion offer ends isn't a good investment, or return on your money. The amount you owe for the kitchen renovation was $30,000.
You still have a $60,000 mortgage on a home that is currently valued at about $200,000, after the renovations. Ideally, you're goal is to cash-out $40,000 from your home, in order to pay off the higher interest debt from the renovations, and an extra $10,000 to help your daughter with some higher education expenses.
Working alongside your Sierra Pacific Mortgage Professional, we will pay off your existing mortgage loan of $60,000 from your current lender, as well as pay off the $30,000 owed to your local home improvement store card. One day after closing, you would then have the leftover $10,000 to help your daughter's college expenses- and a new mortgage for $100,000 ($60,000 current mortgage + $40,000 cash-out = $100,000) maybe even at a lower rate than what you were paying before!
Popular Reasons why People Refinance with Cash-out
For a lower competitive interest rate, with a fixed term
To pay off that higher interest debt from credit cards
The interest rates on a cash-out refinancing loans tend to be lower than the interest rate on a home equity loans and HELOCs
To consolidate and pay off debt with one monthly payment, instead of several payments- and pay less interest overall every month.
To improve cash flow, with less of a need to continue borrowing money from high-interest rate lenders (like credit card companies). Plus, by paying off your higher-interest debt, it can help improve your credit score.
For the possibility to borrow more economically than without a cash-out refinance. For example, when lenders calculate the rate of interest at which you can borrow, they take in account the amount of debt you are currently carrying, and your ability to repay. By paying off high interest debt, like high-interest credit card balances, you may qualify for a lower interest rate on your future borrowing needs.
When consolidating, the interest on a home loan is usually tax deductible, unlike credit card company interest. (Consult your tax professional on home interest tax-deductibility.)
How to best make use of your Home's Equity with a Cash-Out Refinance
The key to making a cash-out refinance work successfully in your favor is discipline. If you’re conscientious about your spending- and can curb any urge to run-up your credit cards soon after they are paid off, then a cash-out refinance can a smart move; by rolling existing high-interest revolving credit card debt into a lower-interest home refinance loan.
Common Questions to Sierra Pacific's Cash-Out Refinance Program
How much money could I cash-out of my home?
There’s no maximum dollar amount- only up to 85-percent of the loan to the current market value of your home, also known as your Loan-to-Value (LTV). Cash-out loans on properties with no existing mortgage, up to 85% LTV with only a 620 FICO score
Will I have Mortgage Insurance?
We offer NO monthly Mortgage Insurance Programs, for loans with 80% LTV or lower. Loans exceeding 80% LTV may be subject to Mortgage Insurance (MI).
What kind of Mortgage Rate might I expect?
Call (702) 420-2250 for the most current rates as rates may change several times each day and are specific to each individual’s scenario- including the borrower's credit score, and the LTV ratio.
What would my cost/fee be for taking out a loan with Sierra Pacific Mortgage?
We charge one low, flat-processing fee for loans closed in-house with Sierra Pacific Mortgage. (Customary 3rd party fees are not included)
What would my cost/fee be for taking out a loan with Sierra Pacific Mortgage?
Most all loans tend to close within 30 days from the application date, but we have a great process flow- so many of our loans close within just 2-weeks!
If you'd like to know more about qualifying for a for a debt consolidation/cash-out loan or to get started, contact me below.
If you would like to know more about our Cash-Out/Debt Consolidation Loan Programs available, I'm happy to help!
Franco Manueli
Branch Manager & Residential Mortgage Loan Originator
NMLS #332420
2580 St. Rose Pkwy., Suite #230
Henderson, NV 89074
Office: (702) 420-2250
Fax: (855) 689-6691
Some products and services may not be available in all states. Programs, rates, terms, and conditions are subject to change without notice. Subject to verification of borrower qualifications, property evaluations and credit approval. Terms and conditions apply. This is not a commitment to lend and not all borrowers will qualify. Sierra Pacific Mortgage Company, Inc. may not be the lender for all products offered. Some loans may be made by a lender with whom Sierra Pacific Mortgage has a business relationship. Sierra Pacific Mortgage Company, Inc. NMLS #1788. Nevada Commissioner of Mortgage License #3268. Additional license info available at: www.nmlsconsumeraccess.org. Equal Housing Lender.
