A cash out allows you to access your home equity through a refinance. This process is very similar to a regular refinance, where you substitute one mortgage (your existing one) for another, except that the new one will be higher. The difference between the two mortgages, is given to you in cash, hence, cash out. The cash can be used for almost any goal, such as home improvement, debt consolidation, or other financial objectives.
How a cash out refinance works
A cash-out refinance is a form of mortgage refinancing in which you receive money in exchange for taking on a larger mortgage after investing the equity you’ve acquired over time. In other words, with a cash-out refinance, you borrow more than you owe on your mortgage and pocket the difference. There are no other loans against the property and you get to have just one monthly payment because it’s one mortgage only.
What can you do with your cash out?
Accessing equity from your home can be used for any needs that you may have. Whether you are looking to pay off other debt by consolidating, invest, home improvements or for large purchases that you don’t want to put in credit cards or take out other loans.
Literally, the options are almost endless as this is your money and you basically do whatever you want with it.
Is the money taxable?
Money from your home equity is not “earned” income and thus, it is not taxable. This is like having money in a savings account. You do not have to report the amount of money that you take from your equity to the IRS or your local tax agency. Also, taking cash from your home does not increase your property taxes or your homeowners insurance.
How much money can you take from your equity?
What is the difference between a cash out refinance and a home equity line of credit (HELOC)?
Pros of doing a cash out refinance
How to start the process?
Getting a cash out refinance isn’t really much different than getting a regular refinance loan. At Andes Mortgage LLC., one of our biggest strengths is putting together plans for our clients to ensure that a cash out refinance is the right play for them. Get the right information for your unique situation in a few minutes by clicking this link and answering a few questions.