Need money to pay for your dream renovation? Did you know a cash-out refinance gives you money to pay for your remodeling and refinances your current mortgage in one transaction? Homeowners refinance to lower their monthly payments, get a shorter loan term, or just lower their interest rates.
Here are five reasons why cash-out refinances work great as home improvement loans:
It’s called a cash-out refinance because you walk away from the closing table with cash to spend any way you want. Buy supplies for your do-it-yourself project, or pay a contractor to do the work for you.
Home equity lines of credit (HELOCs) can be frozen, terminated, or reduced if your home value falls, or you make late payments. With a cash-out refinance, you know you’ll have the money in hand when you need to pay for your renovations.
If you have a high interest rate mortgage, refinancing to a new, lower-rate mortgage can make your monthly payment go down -- even after you take out cash to pay for your project. Imagine polishing up your home without raising your monthly payment.
For example, a $100,000 30-year fixed rate mortgage at 6 percent (APR of 6.5497 percent) costs $599.55 a month. With a 4 percent rate (4.4868 percent APR) cash-out refinance, you can get $25,000 to remodel your kitchen and the payment on your new $125,000 mortgage will be similar at $596.77 a month.*
If you can afford a higher monthly payment, you can shorten your loan term when you pay for your project with a cash-out refinance. Choose a 15-year mortgage (3.125 percent rate and 3.9710 percent APR) instead of a 30-year mortgage and you’ll save more than $60,000 in interest on a $100,000 loan (monthly payment would be $870.76).*
Itemizers can usually deduct mortgage interest for first and second home loans (a tax adviser can explain the rules about deducting interest payments from a refinanced mortgage). Pay** for your renovations with a credit card and you can’t deduct your interest payments.
Ready to learn more about how to use a cash-out refinance to pay for home renovation? Fill out the request form and a licensed and experienced Impac Mortgage loan officer will respond to you.
Excel Mortgage Servicing, Inc. d/b/a Impac Mortgage, Corporate Office located at 19500 Jamboree Rd., Irvine, CA 92612, 800-597-4101. NMLS #128231, AL #MC20787; AK #AK128231 AZ #BK-0910550; California Licensed by the Department of Corporations, under the California Residential Mortgage Lending Act #4131083; Colorado Regulated by the Division of Real Estate; Georgia Residential Mortgage #23673; Illinois Residential Mortgage Licensee; Kansas Licensed Mortgage Company #NOT0025369; Mississippi Licensed by the Mississippi Department of Banking and Consumer Finance; Nevada 7251 West Lake Mead Blvd., Suite 300, c/o Suite 356 & 357, Las Vegas, NV 89128, 702-727-3140, and 10775 Double R Blvd., Suite 121, Reno, NV 89521-8972, 775-682-4385; OR #ML5014; Virginia Licensed by the Virginia State Corporation Commission #MC-5526; and WA #CL-128231. All applications are subject to underwriting guidelines and approval. Not all programs available in all areas.
*Annual Percentage Rate (APR) are based on a refinance of a primary residence with cash out at closing with an interest rate lock period of 30 days. Rate will not increase after consummation of loan. The payment does not include taxes and insurance. Loan based on LTV <= 60 % and FICO >= 740. Other restrictions may apply. Registered trade and service marks / illustrations / designs are the property of Excel Mortgage Servicing, Inc. or Mortgage Success Source, LLC. Excel Mortgage Servicing, Inc. is an Equal Housing Lender. Also doing business in AR, CT, DC, FL, ID, IN, IA, KY, LA, MD, MI, MN, MT, NE, NC, ND, OK, OR, SC, SD, TN, TX, UT, WV, and WI.
** For tax questions, always consult a tax professional.