A home is a large investment as well as a valuable asset. There are numerous ways to take advantage of your home’s worth, whether it is refinancing a mortgage, getting a home equity loan or line of credit, or simply refinancing with a bit of extra cash out. If you are considering any of these options in Frisco, TX, then we can help you find the best solution available for you and your home.
Cash Out Refinance
If you are looking to refinance your mortgage and also need some extra cash on hand for an upcoming expense, then cash out refinance can be a great option. Basically, cash out refinance means that you pay off your current mortgage with a new one while getting some extra cash left over. The amount extra you can borrow depends on a number of factors, such as your current home equity and credit score.
Cash out refinance is a good option if you can find a mortgage with a better interest rate and have a bit of equity in your home. It is also better earlier on in the mortgage. Later on, it is generally better to finish paying off the mortgage rather than add another 30 years of monthly payments.
If you don’t need the extra cash or if a cash out refinance option is not right for your current situation, it is can still be a good idea to refinance your mortgage. Put simply, refinance mortgages replace your current mortgage with new terms, new monthly payments, and a new payback duration.
Here’s how it works: suppose that about ten years into your mortgage, you come across a loan option that offers a better interest rate than your current loan. You take that loan for the amount needed to pay off your current mortgage, and then begin payments on the new loan. This can help lower monthly payments by both lowering the interest rate and essentially extending the payback period.
If you have built up good credit during your mortgage or if interest rates drop, then refinancing can be a great option.
As you pay off a mortgage, you build home equity. Equity is the appraised value of your home minus the current mortgage that you still owe. For example, if your home is worth $250,000, and you still have $150,000 left of your mortgage to pay, then you have $100,000 in home equity.
Equity can be built by paying off the mortgage and making improvements on the home. It is important to build equity because you can use it to borrow money. There are two ways this is handled:
- Home equity loan (HEL): Home equity loans are also known as a “second mortgage.” The amount is based on your current home equity, and money is disbursed to you in a lump sum once the loan closes. You then begin monthly payments to pay it back.
- Home equity line of credit (HELOC): A HELOC works much like a credit card. You get an amount of money that you can draw from over a specified period, and you pay it back with monthly payments.
Taking out a home equity loan or line of credit can be a good alternative to refinancing a home, though it may cause higher monthly payments at the start. However, toward the end, it may also mean much lower monthly payments than refinancing.
There are three ways to financially utilize your home’s value:
- Cash out refinance, in which you take out a new mortgage with some extra
- Refinance mortgage, in which you replace your old mortgage with a new one
- Home equity, which can be used to get a loan or line of credit
Why Choose Patty Newby
Choosing the best option for your financial situation is a complex endeavor, which is why we take a detailed look at your situation to determine the optimal mortgage solution for you. We make every effort to get the right financing for you with thorough analysis and consistent, dedicated work. To find out more about your home financing options in Frisco, TX, call us today.
About Frisco, TX
Located in both Collin and Denton counties, Frisco, TX, is one of the fastest-growing cities in the nation. Between the 2000 and 2010 censuses, the Frisco more than doubled in population—after quadrupling during the previous decade. This massive growth was due mostly to the suburban growth occurring around the DFW area. The city of Frisco is home to various sports arenas and venues, including the Dr. Pepper Ballpark and the new Dallas Cowboys headquarters, which will open in 2016 under the name of “The Star.”