Cash Out Refinance Home Loans

Posted by  on Apr 16, 2009
Cash out refinance home loans allow you to refinance your current mortgage for a higher loan amount than your outstanding debt. You can then receive extra cash from refinancing your home loan to do with whatever you choose. You could use the extra money for any number of things such as other impending debts, home improvements, etc.

Cash out refinance home loans are just like regular refinance home loans, only you refinance for a higher loan amount than your outstanding mortgage in order to use the equity that you’ve built on your home to your benefit. You can get a great amount of money, using your home as collateral, to use for whatever purpose you can think of.

In general the interest rate charged for cash out refinance home loans is a little higher than the interest rate on a regular home loan. However, this is only true if you have the same credit as you did before. If your credit score has improved since you requested your current home loan, you will probably get a lower interest rate and better home refinance loan conditions by refinancing your home loan.

It’s best to check your credit report before applying for a cash out refinance home loan so that you know where you stand and what you can expect by refinancing your current mortgage. Also make sure that there is no prepayment penalty clause in your previous home loan; this can increase the costs of refinancing.

In general though, you can get quite a tidy sum of money for refinancing your home. For example, if you own a property worth $200,000 and you still have to pay a mortgage loan of $50,000. This implies that there is $150,000 worth of property that can be used as collateral. While some mortgage lenders are willing to finance up to 100% of the property or even more, most mortgage lenders only lend up to 85%. So in this example you could request a refinance mortgage loan of $127,500, use $50,000 to repay the previous home loan and keep $77,500 for other purposes.

If you choose to use your refinancing home loan for home improvements you can actually raise the value of your property that you are using as collateral for the refinanced home loan. Your home loan lender will actually benefit from the fact that the assets guaranteeing their money is more valuable and less risk is involved.

Most lenders consider home refinance loans used for home improvements to be of a lower risk and will even offer you special refinancing loan conditions which could include lower interest rates, longer repayment programs and lower monthly home loan payments.


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