6 Benefits from a Cash-Out Refi

Young Couple Rennovating Property Together

Young Couple Rennovating Property TogetherIf you’re a homeowner with considerable equity in your home, you might want to consider a cash-out refinancing plan to finance home projects or eliminate high interest debt. In a nutshell, this arrangement allows you to initiate a new mortgage with a larger principle than your existing one – then, you obtain cash on the balance between the two amounts. Used responsibly, there are several advantages to a cash-out mortgage, including these top six benefits.

  1. You may be able to obtain a better interest rate. As compared to other types of property-based loans, a cash-out refinancing usually offers lower interest rates. Home equity, home improvement and business startup loans are typically a few fractions of a percentage higher. A lower interest rate means reduced monthly mortgage payments.
  2. You can improve your on-hand cash flow. You can apply funds from cash-out refinancing to balances due on high-interest debts or credit cards accounts. Eliminating these debts puts you in a better cash liquidity position for unexpected costs or emergencies. You’ll still carry the debt through the refinancing, but you’ll only be making one payment per month on a loan carrying a much lower interest rate.
  3. You’ll get the opportunity to improve your credit score. When you pay off or pay down balances on revolving debt or credit cards, you improve your credit rating. Credit cards that you’ve maxed out have a severe negative impact on your score, as are those where you’re only paying against interest instead of the balance.
  4. There are tax advantages of cash-out refinancing. You’ll take advantage of a couple of tax benefits with a cash-out refinancing. First, the interest you pay is tax deductible; the interest you pay on other types of debt or credit cards is not. Second, some of the closing costs you’ll incur through the refinancing process are also not subject to tax liability.
  5. Fees for refinancing can be minimal under certain circumstances. There are costs related to refinancing your mortgage, including application fees, getting your credit rating, document review expenses, and title insurance and search. However, if you have high equity in your home and a great credit rating, these costs may be reduced. In addition, if you stick with the same lender that issued your original mortgage, some of these fees may not be necessary the second time around.
  6. Cash-out refinancing can help you boost your home’s fair market value. Many homeowners use the proceeds from their cash-out refinancing to fund home improvement projects. These renovations almost always cause the fair market value of the property to increase, whether the projects are interior, exterior or add-ons to the existing square footage.

While homeowners must use caution when arranging a cash-out refinancing plan, the advantages can be significant under appropriate circumstances. If you’d like to know more about whether a cash-out refinance is right for you and qualification requirements, consult with a refinancing professional for details.

*Disclaimer: Paramount Equity Mortgage is not a tax advising company. If you have any questions, please reach out to your CPA for tax advice or other tax related questions.

 

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Is It Time to Refinance? 5 Factors to Help You Decide

Beautiful curb appeal of American house in olive exterior paint.

When a new mortgage replaces an original mortgage, the process is known as refinancing. You, the borrower, can get a much better interest rate if you choose to refinance. In a shaky economy, funding a home mortgage can prove troublesome. Ignoring the problem will not only impact your credit score but could leave you financially unstable.Beautiful curb appeal of American house in olive exterior paint.

Not sure if you should to take out a new loan of this kind? Absorb the following factors to make an informed decision about refinancing:

  1. Your Credit History Has Improved - A lender will always take a borrower’s credit score into account before offering a loan. A credit score will be negatively impacted if a payment is failed to be made or if a payment is made late. These two reasons will cause interest rates to be higher. A borrower with a high credit score will be considered an ideal candidate for refinancing, which will in turn be given a lower interest rate.
  2. Your Income Has Increased - When your debt-to-income ratio changes, it will be the perfect time to refinance your mortgage. The extra monthly cash flow you are receiving, whether it is from working overtime or you were given a raise, can be used to fund a mortgage refinance. Using extra cash to pay off a mortgage loan will ensure your payments are made on time. As a result, your credit score will improve and your chances of obtaining another loan in future will increase.
  3. Your Debts Have Decreased - One of the main reasons why a lender will turn down a borrower for a loan is because their debts are too high. Committing to a mortgage refinance means that you need to be in a comfortable financial position to do so. Aim to repay your debts little by little and then explore your refinancing options.
  4. Your Home Value Has Increased – Have you thought about how much equity you have built up to refinance a mortgage? A great rate is guaranteed once your equity increases, so pay attention to changes in property value if you are keen to refinance with low interest rates. In order to estimate your home’s value, read news reports, assess property tax valuations, and investigate the recent sales of similar properties.
  5. You Want A Fixed Rate Mortgage - Fluctuating interest rates may leave you feeling worried. After all, how are you supposed to relax if your monthly payments increase and your income stays the same, or decreases? Replacing an existing loan with a mortgage refinance that has a fixed rate is a better option than an adjustable rate mortgage because you will know precisely how much you are paying and when.

Refinancing could leave you with a much fatter wallet since you will be spending less for your home in the long run. Lower interest rates will relieve you of some pressure and make it easier for you to avoid late payments. When you consider the fact that late payments will have a negative impact on your credit score, it’s pretty clear to understand why so many homeowners are refinancing a home mortgage.

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The Financial Benefits of Refinancing

Coins in glass jar for money saving financial concept

Coins in glass jar for money saving financial conceptRefinancing is something that most adults will think about at some point in their lives. The reasons why homeowners choose to refinance will depend on their personal circumstances. One of the main reasons being because they are no longer able to afford the monthly mortgage payments and are therefore seeking out an option with a lower interest rate. Converting to a fixed-rate mortgage from a floating rate mortgage (better known as an ARM or adjustable-rate mortgage) could ease the financial burden faced by homeowners who are trying to hide from the rate-inflating cloud that looms over them.

Whatever your reasons for refinancing might be, just keep in mind the basics before you take the next step.

Smart Reasons to go Down the Refinancing Route

Do you want to shorten your mortgage? If so, you should definitely consider going down the refinancing route. In your particular situation, an option that could mean paying lower interest rates is definitely a smart move.

Here are some top reasons to refinance:

Consolidate Debts – When debts pile up, a homeowner can relieve themselves of financial worries by using any equity that has accrued on their home to reduce the debt pile.

Explore Loan Types – Unless you know exactly what loan options are made available to you, how are you supposed to know which type suits your circumstances? Although interest rates might be lower when you first start contributing to a mortgage with a variable rate, they might spike when you least expect it.

Adjust Repayment Terms – Falling into a financial predicament is nothing to be ashamed about. Simply take action and prevent the problem from worsening and tarnishing your credit score forever by refinancing. By doing so, you can discover what options are available regarding repayment terms.

Does refinancing have an impact on credit rating?

We could have talked about this in the list above, but let’s go a little more in-depth about refinancing and the way it could influence your credit score. The truth is that your credit score could be positively impacted immensely if you finance wisely. Don’t expect the change to be instant, but do expect it. A good credit will not only make mortgage hunting easier but also, job searches! For this reason, financing is a long-term worthwhile option that could present you with further lending possibilities for the future.

Things to Keep in Mind Before Refinancing

The standards that have been set out for loan approval are not quite the same these days as they were many years ago. If your credit score is below 720, obtaining financing might be a struggle. Refinancing with home equity puts you in a good position, as does having a good debt-to-income ratio. The rules for lending based on the debt-to-income ratio have tightened up, also.

Generally, you will be granted refinancing if your ratio falls somewhere between 36% and 40%. If you are willing to pay an increased interest rate to fund the closing costs, this will improve your chances at obtaining home refinancing.

Putting Things into Perspective

We all have debt obligations and as nice as it would be to not lose a valuable night’s sleep over them, it happens. With refinancing options, you can lift a weight off your shoulders. Furthermore, the reduced monthly payments could aid you in improving your credit score, so keep your options open and make an informed, confident decision.

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How to Get the Lowest Possible Interest Rate on Your Home

Paramount Equity® - low interest rate

Lowest  Interest Rate - Paramount Equity®Are you wondering how to get the lowest interest rate on your mortgage? Getting the best interest rate requires preparation and advanced planning. You must lock in your mortgage rate at the right time. Other factors may also affect your rate, including your credit score, loan to value of the home, the type of home you are buying, and the type of loan you are considering.

Your credit score is a very important aspect in determining what interest rate you will pay. Obtain a copy of your credit report. Any incorrect information can cause your credit score to drop. If you find any mistakes on your credit report, make sure they are corrected before you apply for a mortgage. If you are able to, try to pay down your credit card debt before you apply for a mortgage. (more…)

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Refinancing your Home – The Basics

Refinancing your Home – The Basics

The decision to refinance your home is a lot like the decision you made to buy your first home. You have to confront many of the same questions from a different angle. Those questions include:

• When is the right time to refinance?

• How do I find the best deal?

• What bank should I work with?

• How long until I experience the benefits of refinancing?

• Is all of this really worth it?

Homeowners usually refinance mortgages for one of two reasons: (more…)

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How can a Refinance Help Me?

How can a refinance help me - Paramount Equity®

Do you think it’s time to refinance your home? If you’re asking, “How can a refinance help me?”, take a look at the following situations where it truly can. It’s generally a good idea if:

  • You can reduce the interest expense on your mortgage

One of the biggest reasons to ask, “How can a refinance help me?” is if you want to reduce the interest costs for your mortgage. If you refinance at a lower rate and also significantly reduce the amount of time needed to pay off your mortgage by doing so, you can save significant money because you’ll lower the final cost of your home.

If you’re struggling to make monthly payments (more…)

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Refinancing a FHA Loan

Refinancing a FHA Loan

As a homeowner, you receive great benefits from your property investment, especially if you have a FHA loan.  An FHA insured loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. With these loans, you can obtain a lower mortgage and decrease your monthly amortization. This explains why many homeowners are leaning towards these loans.

Features of Refinancing a FHA loan 

  • Your credit standing is never an issue. This is a very appealing feature. Homeowners like you are not required to
    submit yourself to a bevy of complicated processes that seem to take forever. All you have to present is your existing mortgage. There are no endless questions asked. (more…)
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What can a Home Refinance do for Me?

What can Refinance do for Me - Paramount Equity®

One of the many ways that financial experts have been telling people to save money is to look into having their home mortgages refinanced. You might be looking at engaging in a home refinance, but before you do that, you’re probably wondering if going with a refinance makes sense for you.

There are a number of ways that home refinancing can benefit you, including:

Lowers your interest rate.

When the economy was going well, interest rates were higher. This was done to keep inflation in check. However, when the economy hit a downward turn, the interest rates dramatically dropped. (more…)

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