Many homeowners are rooting for a Cash-Out Refinancing. The reason – it has many undeniable benefits that entice homeowners to sign up for a new mortgage. But why Cash-Out Refi?
Cash-Out Refinancing refers to paying your existing mortgage and taking in a new one all the while tapping into your home equity. Once a lender approves a Cash-Out refi, the equity you tapped will be paid out during closing.
But the question is, can you do a cash out refinance in Texas? The answer is yes.
Texas Cash-Out Refinancing is a good option if you need a new mortgage and extra funds. It gives homeowners the opportunity to enjoy many perks, but like any mortgage, it pays to learn about its pros and cons.
Perks Of Taking Out A Cash-Out Refi
Easy To Qualify
Since you already have an asset AKA your home, you already made a good credit history out of paying your mortgage dues on time, and you have enough equity which is needed for the loan, it would be easier for you to qualify and get approved.
Use The Proceeds For Different Purposes
Homeowners who got approved for a Cash-Out Refinancing can use the cash proceeds however they deem fit. Some of the common ways homeowners use the funds are for the following.
- Home improvements
- Fund higher education
- Start a business
- Invest in real estate
- Consolidate debt
Recommended Read: Should You Cash Out When You Refinance?
Lower Interest And Mortgage Rate
Refinancing typically lowers your mortgage and interest rate especially if you bought your house when home loan rates are higher. Also, the interest you pay for a cash-out refinance is lower than those in Home equity Loans.
The great thing about mortgage interest fees is that they are tax deductible. This means that with a cash-out refi, you get to have a bigger tax refund.
Convert From An ARM Mortgage Into A Fixed-Rate Mortgage
Homebuyers tend to go for Adjustable-Rate Mortgages because of the low rates during the first few years of the loan term. However, once the initial fixed period expires, the price will start shifting depending on different benchmark indexes. You can convert your mortgage into a fixed-rate mortgage with a cash-out refi.
Drawbacks Of A Cash-Out Refi
New Mortgage Application
When you finally decided to refinance your mortgage, you’ll go through the home loan process again and hope your cash-out refi application will get approved.
Cash-Out Refi Costs
The costs that come with refinancing can take a toll on your budget. Take the interest closing costs for example. It has significant closing costs which can be between hundreds to several thousands of dollars on top of your expenditures.
Risk For Foreclosure
With your house on the line, not paying your mortgage on time can lead to foreclosure. You might end up losing your home.
Good Read: 7 Steps to Avoid Foreclosure
Before taking on a cash-out refi, make sure to know other options and see which one makes the best sense for your situation.