A photo of cheerful family sitting on sofa at brightly lit home. Happy parents are playing with son in living room. They are in casuals.

Many people have a variety of investments, from things as simple as savings accounts and CDs to mutual funds and Roth IRAs. We use them to suit a variety of purposes. Still, many of us don’t realize the investment potential of probably the biggest asset most people have: our house.

It’s very easy to think of your home as just a shelter and a gathering place, but you can also use the equity in your home to take cash out and use it for maintenance, to boost your retirement fund or to consolidate debt.

We could talk all day long about the numerous benefits of utilizing your home equity. However, it’s always beneficial to see a real-world example. Angela M. of Los Angeles was able to accomplish multiple goals when she did her cash-out refi.

Debt Consolidation

Angela was going through a divorce and needed to get the home refinanced in her name. While going through the process, she decided to take advantage of the opportunity to use her home equity to improve her situation.

“Being debt free was the main goal,” she said. “I own my own consulting business, so now I have very manageable expenses each month, so if business goes up or down, I am comfortable knowing I can cover my house and car payments.”

Not having to pay on credit card balances has opened up new opportunities for Angela both financially and in life. Now that she’s not paying down the credit card balances, she said taking cash out has given her room to breathe.

“I have no retirement,” she said, “so now I can invest in my home and start saving money for my retirement. And travel!”

Using a cash-out refinance to consolidate debt can be a very good option. Even after the recent uptick, rates for a 30-year fixed-rate mortgage are still in the low- to mid-4% range. If you compare that to even a low-interest credit card where the rate might be 12% or more, taking equity from your home to pay off other debts may be very attractive. You pay much less in interest over time.

Reinvesting Your Equity

One of the big things you can do is take cash out of your home and reinvest it elsewhere. You’re really only limited by the scope of your ideas.

In addition to consolidating debt and putting money toward her retirement, Angela is in the process of meeting with contractors to look at some property upgrades.

“I am planning an addition,” she said. “I currently have a three bedroom, one bathroom and want to add a bathroom. However, I may add a bedroom and a master, thereby increasing my value significantly.”

Although Angela was looking to boost her property value, you don’t have to be planning something as big as a room addition in order to benefit from using your equity.

Little things come up all the time that we have to free up funds for. For instance, maybe your furnace has picked the beginning of February to give up the ghost.

Financial services firm PwC conducts an annual financial wellness survey. Nearly half of employees surveyed had less than $50,000 saved for retirement. Furthermore, 43% of employees surveyed think there’s a good chance they’ll have to dip into their retirement funds for non-retirement-related expenses. Taking cash out of your home can be a good way to play catch-up and sock more money away in your 401(k) if you have to.

Many of you are probably planning to send children to college, some sooner rather than later. It’s an unfortunate fact that the average college graduate left campus with more than $37,000 in debt in 2016. That number is up from $35,000 and appears on pace to rise every year. With that in mind, you may be looking for a way to give your college fund a boost. Your home equity can be used to accomplish this as well.

Unlike a home equity loan, a cash-out refinance isn’t a second home loan. Since it’s your primary mortgage, it carries less risk for the lender giving you the money. Because of this, you may be able to get a lower rate.

Does this sound like a loan option you might be interested in? You can check out more information on cash-out refinances and get started online or call (888) 728-4702. We’ll also be happy to answer your questions in the comments.

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This Post Has 8 Comments

  1. We’re looking into a cash – out refinance to consolidate some bills, and upgrade our property, and a 15 year mortgage as well as a lower interest rate.

    1. Hey Thomas:

      We can certainly help you look into that. If you would like, you can get a full refinance approval online through Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716. We would be happy to work with you. Have a great day!

      Thanks,
      Kevin Graham

  2. I would like to use some of my home equity to be able to do some projects on my house. I paid my house off with my inheritance when my husband Albert died. Please advise what I am able to qualify for.
    Deborah Likens

    1. Hi Deborah:

      We would be happy to help you look into your options. We need to take a look at your income and assets as well as your credit. If you want to get a complete refinance approval online, you can do so through Rocket Mortgage. Otherwise, one of our Home Loan Experts would be happy to talk to you at (888) 980-6716.

      thanks,
      Kevin Graham

  3. I would like to know what your interest rate would be for a cash out refinance loan. I have done one earlier this year with paramount mortgage. I did not get enough money to complete all the projects I wanted to do with the money I recd. I have set half of it aside for emergency purposes. i am looking for lowest possible rate, and no more than 4.25% which is what i am paying now.
    thank you
    lisa neilson

    1. Hi Lisa:

      I can’t quote your rate on the blog because every situation is different. I can give you our rates page so you can get an idea of where our rates sit. I’m also going to recommend you speak with one of our Home Loan Experts. With the previous loan being so close to this one, there may be a waiting period before you can refinance again depending on the exact timing. You can get in touch with one of our experts by calling (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

    1. Hi, Susan! We’d be happy to help. Start by reaching out to one of our Home Loan Experts. They’ll take a look at your situation and point you in the right direction. Here’s the number to call: 888-980-6716. Best of luck to you and your upcoming projects!

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