What is Cash Out?
A cash-out is a refinancing and equity home loan where the funds are released directly to you instead of being put on a credit card or line of credit. Cashouts are considered high-risk loans because lenders can no longer guarantee that you use the loan for its intended purpose once the funds are released. In addition, some people use the cash out to make other loan repayments, meaning it will be challenging to repay their equity loan.
What are the pros?
- You may be able to secure a lower interest rate on your existing mortgage
- You can use the money to pay off credit cards with high interest rates, which could save you money.
- You can use the funds to perform home renovations to increase your home’s value and resale potential
- You can use the funds to further your education or pay off medical bills
What are the cons?
- If you cannot afford the increased repayment amounts, you potentially lose your home due to foreclosure.
- If you borrow more than 80%, you may have to pay Lender’s Mortgage insurance even if you are already paying it on your existing mortgage.
- Cash-outs have additional fees you need to pay, which may not end up saving you money.
Why you should use the brokers at Mortgage House
Our team of brokers will sit down with you and work to understand your financial situation. We want to offer you the best products that fit your needs. Before you apply for a cash-out loan, you need to weigh the benefits and risks to decide if it is the right option for you. Our brokers specialise in home equity loans and can help you find the right choice for you.