Need cash to do renovations on your home and get it ready to sell? Got at least 20% in equity? Then you might want to consider a cash-out refi, which lets you take advantage of the equity you’ve built in your mortgage.
When you have a cash-out refi, you basically get a whole new mortgage that is larger than your current mortgage. If you have a $350,000 mortgage and you’ve built $100,000 in equity, you could refinance your mortgage for $400,000. Then, you can take out the cash money that you’ve already paid in. In our example, you could take out $50,000 cash and use that for whatever you need. Many people use this cash to do renos so they can sell their home for more and have a bigger ROI when they sell.
But be cautious: this can increase your likelihood of foreclosure. And, of course, you’ll want to make sure that your home’s value matches the amount of cash you want to pull out. You can also face higher interest rates with this kind of refi due to the larger loan amount.
