Is it Really Okay to do a Cash Out Refinance?

Filed under: Borrower Tips

Have you seen cash-out refinances advertised all over the radio and other marketing platforms? I want to talk about this topic today to answer common questions about this strategy. Equity is way up, making it seem like a good idea right now.

My Approach for Real Estate Financing

Full disclosure: the way I think about any real estate purchase is by encouraging clients to focus on the long-term hold, building equity, and paying off the mortgage so you have a place to be living mortgage-free during retirement. A cash-out refinance can be a significant setback to that process.

But there are plenty of situations where it might make great sense. I wouldn’t necessarily suggest that you pull out $100,000 to buy a fancy RV. On the other hand, if you are pulling out money to reinvest in the house or you have debt you need to pay off, then it might make sense. You really have to look at the full picture to work through the options, then understand the longer-term repercussions from pulling out the cash.

Looking at the Bigger Picture

When you are pulling out cash, you might also have the benefit of refinancing to reduce the interest rate. Another thing I like to see people do whenever possible is to pull out the cash and consolidate debt, but go with a shorter mortgage timeline (such as a 20-year loan instead of a 30-year loan). It’s possible that you might be able to create a much more affordable and strategic financial situation for you – right now and in the long run.

I don’t want to make sound like we never do cash-out refinances. Our team has done plenty of them over the years, and we will continue offering these services. But know that we are always going to look at the short-term and long-term picture. We want to hep you evaluate what makes sense financially that supports your future goals.

If you want more info or are wondering about your options, then reach out and we’ll discuss your current needs. I’m here to help!

Franklin Loan Center | NMLS 237653
Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, 4131316
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