Low-interest mortgages motivate people to refinance their mortgages in order to get some cash and lower monthly payments.

Mortgage refinancing – a way of replacing a previous loan with a new loan with the purpose of lowering interest rates, faster payout, tapping into equity, or switching from adjustable-rate mortgage to fixed-rate mortgage and vice versa.

Other benefits include securing a better loan, lowering interest rates, saving more than you used to, and maintaining one payment instead of many.

However, if the new mortgage’s value is greater than what you owe, you get a cashback for it. We call this cash-out refinancing. With this cashback, you can do the following:

  • Home projects such as a bathroom, kitchen, and basement renovations.
  • Add it to your investments.
  • Pay off credit card debt.
  • Buy a property.
  • Cope up with emergency expenses
  • Use it for educational expenses such as college tuition fees.

If you want to qualify for cash-out refinance, you must meet credit score, debt-to-income ratio, and equity requirements. In the majority of the cases, you need a credit score of more than 620.

To get the cash, you need a specified amount of equity in your home. In the majority of cases, you have to leave at least 20% of the equity in your home.

The mortgage company also takes into notice your debt-to-income ratio, which can be calculated by adding all monthly debt and divided by gross monthly income.

Renovation and Home Projects

Here is how you can renovate your home with loans:

  1. Buy a mortgage with extra money, which you can use for home projects.
  2. Refinance your current mortgage to get cash-outs.
  3. Apply for personal loans.
  4. Apply for government loans
  5. Apply for home equity loans.

You can choose any of these, but we recommend you go for cashouts.

Why Should You Refinance for Home Projects and Renovations?

Cash-out interest rates are generally better than home equity loans and personal loans. There is a possibility that you may get more cash than you would have got if you went for personal loans. Also, your home’s value may increase after renovations, which will help you quickly build back equity.

Besides, your monthly payment may go down, and there may be tax benefits for the interest rate of mortgages you pay. You will also have the full right to use the money as you like.

Using cash-out to renovate the basement and bathrooms is a good idea as it won’t cost you anything from your monthly budget. It is a low-cost way of making your home better and getting rid of expensive renovations if you don’t have a cash-out refinance.

You should consider refinancing your mortgages for renovations when you don’t have enough cash to spend on home projects and basement renovations, if you don’t need the cash-out amount for anything else such as college fees or emergency expenses and if you are going to buy a low-cost property which requires serious renovations.

To apply for mortgage refinancing click here and get pre approved today!

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