The mortgage rates continue to plunge, and millions of homeowners are losing out on potential monthly savings because they are not taking advantage of the right situations.
According to a CNBC report, about six million homeowners are eligible for home refinancing. Several of them can take advantage of refinance mortgage with cash out.
By enrolling in these programs, they can reduce their rates by a minimum of seventy-five basis points. In real terms, had they applied in June 2019, their monthly savings would have reached almost 300 USD.
It was at that time when the average thirty-year fixed rate was 3.94%. And the rates continue to plunge today, as the thirty-year fixed rate is down to 3.88%.
What is Refinancing with Cash Out?
When you refinance mortgage with cash out, you replace your current mortgage with a new one. The new loan will be higher than what you owe on your home.
The difference will be paid to you in cash. You can then use the money to consolidate your debts, renovate your house, pay for hospitalization, and other emergency expenses.
However, it is crucial that you still have equity left for your home for cash-out refinancing.
Do I Require a Good Credit Score for Refinancing?
Typically, lenders would require you to have a minimum score on your credit of at least 620. If Federal Housing Administration programs cover you, you will have a lower minimum cap to avail, for refinancing.
However, the higher your credit score is, the better rates you would get. Most Americans refinance their homes after several years by when they would have already built up equity.
So, if you are eligible, it is the best time to refinance. And you might even get a better rate because the market has cooled off. In June 2019, the number of applications for home refinancing jumped to 92%. But the number has plateaued in recent weeks.
There could be three factors:
1. The number of the remaining homeowners still eligible has shrunken
2. Homeowners are less worried now that the mortgage rates have bottomed out
3. The Fed has given the assurance that it will continue to find ways to keep mortgage affordable
Benefits of Cash-out Refinancing
When you apply for the program, you will enjoy the following benefits:
1. Reduce your interest rates
Refinancing will result in lower interest rates when compared to your home equity line of credit or HELOC. It occurs when you purchase your property when the mortgage rates are higher. As you know, the mortgage rates now are the lowest in years.
2. Improve your credit score
When you use your home equity to pay off your debts, you can boost your credit score. You can do this since you cut down your credit utilization ratio, defined as the amount of used credit available to you.
3. Get cash
Of course, the reason why the cash-out refinancing is very popular is the money. You can use the funds as a contingency, debt consolidation, or to pay for that much-deserved vacation.
Although refinancing can be complicated, most homeowners can process the application on their own. You do not even need the services of a lawyer to help you navigate through the whole process.
Author: Cathy Carter
