Since March, many of us have been staying home as much as possible to reduce our risk of exposure to the novel coronavirus and COVID-19. For some, that has meant homeschooling children, working from home or maybe even just baking a lot of bread.
Now, even though many states are loosening restrictions and ending stay-at-home orders, many people still feel safer at home. But is your home what you want it to be?
Despite global economic turmoil, the local real estate market remains strong in much of the United States. Home prices have gone up in the past few years, and those prices are mostly holding steady.
With mortgage interest rates at record lows, you have a unique opportunity to make your home feel a bit more like a palace.
It may be time to consider a cash-out refinance on your home.
What is a cash-out refinance?
A cash-out refinance is just what it sounds like — you refinance your house and take out cash at the same time. A cash-out refinance replaces your existing mortgage with a new mortgage that may be more than you owe on your house. The difference goes to you in cash.
You need to have some equity in the home so you can take out the difference between the balance of your mortgage and the current value of the home in cash.
For example, if your home is valued at $400,000 and your mortgage balance is $200,000, you have $200,000 of equity in your home. You can refinance your $200,000 loan balance for $350,000, and receive $150,000 in cash at closing.
This means your monthly mortgage payment will be more than it was.
What can you do with the cash?
Just about anything! Most people use this money to finance a home renovation.
Now that you’ve spent so much time in your home due to coronavirus, you may be thinking that your kids need a playroom or it’s time to finish that basement.
Maybe you could really use a dedicated office for teleworking, or it’s time to put on a screened-in porch for better indoor-outdoor living.
Maybe your kitchen isn’t big enough, or your appliances have seen better days.
Making home improvements can further increase the value of your home, so this is often the smartest way to spend the cash. Plus, certain home improvements may be eligible for tax benefits.
But that’s not your only option: You can use this money to pay for higher education, pay off higher-interest debts or even invest.
Our financial professionals don’t usually suggest using this cash for a vacation or to pay for a car because you won’t get a positive return on your investment. (Plus, CommonWealth One offers amazing auto loan rates and vacation savings accounts tailored for these expenses!)
If you’re interested in learning more about how to use the equity in your home, please contact us! We’d love to talk about your home and how you can put it to work for you!
CommonWealth One has several webinars planned this week about refinancing, home equity and mortgages! Be sure to visit our website to register for these free informational, educational opportunities.
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