Texas Cash Out Refinance
Owning property is a good investment for many reasons. And the primary one is that, as you make payments on your mortgage, you are also building equity in your home that gives you access to cash when you need it! How can that be possible? The answer is to do a cash-out refinance in Texas! It allows you to access funds without having to sell your home!
What Does Cash-Out Refinancing Mean?
Texas homeowners with equity in their property can easily get extra cash with a cash-out refinance. Whether you’re looking to make home improvements, consolidate other debts, or pay for large expenses, a cash-out refinance could be the solution.
This type of refinancing allows you to refinance your existing mortgage and take out a new loan for more than you owe on your home. The difference between the two loans is then paid out to you in cash. With a cash-out refinance, you’ll still have just one monthly mortgage payment to make, but the amount you pay each month may differ from your current payment.
Cash-out refinance in Texas has several benefits, however, it is important to consider its terms and conditions before signing on the dotted line.
Texas Cash-Out Refinancing Benefits
1. Receive extra cash for any purpose
Cash-out refinancing can be beneficial for borrowers who need extra cash for any purpose, such as home improvement projects, large purchases, or investing in stocks or real estate. refinancing also allows borrowers to take advantage of lower interest rates if market conditions have changed since they originally obtained their mortgage.
2. Consolidate debt
A cash-out refinance is a popular way to consolidate debt and, as a result, decrease your monthly expenses.
3. Save for reserves in case of an emergency
Creating a reserve fund in case of an emergency with cash-out refinancing can be especially helpful for self-employed or borrowers with irregular income, as it can provide a financial cushion in case of unexpected expenses. Additionally, by using the equity in your home, you can stop relying on credit cards or other high-interest loans.
4. Tax benefits
Cash-out refinances can provide tax benefits by allowing taxpayers to deduct the interest paid on the loan from their taxes.
Cash-Out Refinance Example
For example, you have a $200,000 mortgage with a 4% interest rate. You could refinance that loan into a new mortgage for $250,000. The extra $50,000 would be paid to you in cash. In this example, you would increase your monthly payments by about $130, but you would also receive a lump sum of cash you could use for any purpose.
Cash-out refinances can be a great way to access the equity in your home without taking out a second mortgage or HELOC. However, they do have some risks. One of the risks is taking on more debt. It means if housing prices decline, you could wind up owing more than your home is worth.
Texas cash-out refinance requirements
To get a cash-out refinance, you’ll need to have a credit score of at least 620. However, depending on the loan program, you may qualify with a score as low as 580.
Of course, the better your credit score is, the better interest rate you’ll have. There are a few things you can do to improve your credit score, including paying your bills on time and maintaining a good credit history. If you need help boosting your credit score, contact us for a free consultation.
Most lenders prefer to see a DTI ratio no higher than 43 percent on the cash-out refinance loan. However, some lenders will go up to 50 percent, and others may have a lower DTI limit closer to 40 percent. Before deciding to pursue a cash-out refinance, LBC Mortgage will help you to compare offers from multiple lenders to ensure you get the best terms possible.
In most cases, you’ll need to retain at least 20 percent equity in your home to qualify for a cash-out refinance. It means that if your home is valued at $200,000, you could borrow up to $160,000 through a cash-out refinance. Keep in mind that the interest rate on a cash-out refinance may be higher than the rate on your original mortgage, so you need to analyze your financial goals and compare offers from multiple lenders.
Home Equity Loans VS. Cash-Out Refinancing In Texas
When you own a home, you have two potential sources of funding for large expenses: home equity loans and cash-out refinancing. Both options allow you to tap into the equity you’ve built up in your home, but they work in different ways.
- A home equity loan is a second mortgage that gives you a lump sum of money you repay over time, usually at a fixed interest rate.
- A cash-out refinance, on the other hand, replaces your existing mortgage with a new one while also giving you a cash payment.
Which option is right for you depends on several factors, including the amount of money you need and how long you need to repay it.
Apply for a cash-out refinance in Texas
LBC Mortgage has extensive experience helping homeowners across Texas take advantage of cash-out refinance. We’ll work with you to understand your unique financial situation and goals and help you find the right lender and loan program for your needs. Our experienced Texas mortgage broker will work with you throughout the process to ensure everything goes smoothly.
Our main goal is to do everything so that you could get the best possible deal on your cash-out refinancing in Texas. Contact us today to learn more about our services and how we can help you reach your financial goals.