- BUY A
- SOUTH STATE
Thinking of a cash out refinance? If you’re going to borrow money against your home’s equity to cover other bills you have several options. One plan might be to refinance the house and take cash out. Another might be to get a home equity loan or home equity line of credit.
What is a Cash Out Refinance? A Cash Out Refinance is a home loan that pays off your current first mortgage. The result is a new home loan that might have different terms that the original loan. You might end up with another kind of loan, or a different interest rate, and perhaps a shorter or longer timeframe for paying the mortgage off.
Home equity loan (or credit line) – This type of loan is quite different from a cash out refinance loan. It is taken out in without interfering with your first mortgage. You retain the first mortgage rather than replace it. This kind of loan will have a separate repayment schedule.
Cash out refinance – With a cash out refinance the borrower receives one amount when they close out their refinance process. The funds are first used to pay off the existing mortgage, including expenses like closing costs. Any additional funds are for your use.
Home equity loan – With this type of loan you will receive one amount when the loan closes. You do not pay off the existing mortgage.
Home equity line of credit – This type of loan usually has a lower interest rate than cash-out refinances or home equity loans. Usually the interest rate is variable and fluctuates with an index. Your lender may also offer you the option of a fixed rate loan.
Borrowing from your home equity is a great way to generate low-cost funds to pay bills or for other uses. Depending on your personal situation and individual financial needs, your lender can help you decide which of these options is right for you.