PITTSFIELD, Mass. -- Real-estate-yogi.com does, and is here to share its knowledge on the subject, such as:
· Explaining Cash-Out Refinance
· Home Equity Loan
· Pre-Plan
· Reasons for Cash-Out Refinancing
Cash-Out Refinance Defined
Cash-out refinance is a type of second mortgage in which one takes out more than he actually needs for the mortgage loan and keeps the extra money. A person can put the cash toward anything he desires – a family vacation, medical bills, college tuition – as long as he pays it back along with the new mortgage. If one owes $80,000 on his current $160,000 mortgage, he’d take out a refinance for $110,000, keeping the extra $30,000. Generally, when one refinances, he gets a lower interest rate than he got originally, making his payment less than what it was.
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Inquire about a Home Equity Loan
Think of a home equity loan as an extra loan, in addition to the mortgage, which is completely based on the equity one’s home has accumulated over the years. Cash-out refinance for bad credit or good differs from an equity loan in ways besides having a lower interest rate. There are closing costs involved in refinancing a mortgage, whereas a home equity loan does not have them. Home equity loans make more sense if one is far into his mortgage, as it doesn’t make sense to refinance if one is 10 years short of paying off a 30 year mortgage.
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Plan Ahead for Refinance
If one is looking into a cash-out refinance for bad credit, it’s wise to fix up the credit score first. Remember, it damages one’s rating if he is denied for new credit. Some ways to come up with enough money to pay off arrearages are to pick up a weekend job, sell some unused items at a yard sale, or borrow it from parents, siblings, or friends. Put all income from any of these options toward eliminating debt and watch the credit rating improve.
Why to Refinance
Think about what purpose the extra money from cash-out refinancing will be used for before taking the loan out. If it’s going to be to build an addition onto the house, then go ahead. If one is planning to use that cash for something short-term, such as a family vacation, one may want to reconsider the refinance. Keep in mind that one will be paying for this for 15-30years; is a vacation worth that much repayment time?
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