What we might not think about is the immediate monetary value a home has. As you make payments on your home, you build equity. You can refinance and turn that equity into cash to help pay for your child’s college education or buy that much needed new car.
Alternatively, if you have credit card debt, you can consolidate that debt and roll it into your mortgage at a much lower interest rate.
The beauty of a cash-out refinance is that it can be used for anything you want. Need money for home repairs and improvements? What about college tuition? Maybe you need money for car repairs. A cash-out refinance can help you convert the equity built up in your home to cash.
Unlike a home equity loan, a cash-out refinance isn’t a second mortgage. Because it’s your primary mortgage, the loan is less risky for the lender and you’ll be able to secure a lower rate.
Credit cards are one of the most convenient inventions known to man. They enable things like online shopping and many even offer rewards.
They’re great, just as long as you pay the balance because they also have some of the most punishing interest rates for not paying off your bill in full.
According to the latest information from Bankrate, the average APR interest rate exceeds 15% for a cash-back credit card. If you get behind on that payment, the interest charges on the debt can add up quickly. It can be a scary road to go down.
Fortunately, there’s something you can do to pull yourself up. A cash-out refi can be used to help you consolidate the debt.
While credit card APR is high, mortgage rates are really low, currently in the 4% range. When you refinance, you can pull equity out of your home and roll your credit card debt into your new mortgage payment. This means you would be paying a much lower interest rate on that debt. It also improves your credit rating because you don’t have that outstanding debt on your credit report.
As long as you make your payment on time, you can use the consolidation to get yourself back on track. As a bonus, unlike credit card interest, your mortgage interest is tax deductible.
This is also a great time to refinance. Mortgage rates are still at historically low levels. Learn more about how a cash-out refinance could help you.
Do you have high-interest debit you’d like to pay off? Learn more about how your mortgage can help you consolidate debt and reduce your interest rate.
There you have it, two ways you can use your home equity to your advantage. Have any questions? Drop us a line in the comments.
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