Many homeowners refinance to pay off debt that has built up over time, such as credit cards and auto loans. If you find yourself struggling with high-interest debt, you’re not alone. According to Experian, the average American household has $92,727 in personal debt.

For homeowners, the good news is that you can use a cash-out refinance to pay off debt. With a cash-out refinance homeowners get a mortgage for more than they owe on the home. In turn, they can take the difference in cash and pay off high-interest debt with it, which helps them to save more money over the long term.

Mortgage interest rates can be an amazing bargain compared to consumer and installment rates. Total interest, total term, and cash flow savings can be significant with the right plan.

Consolidating multiple debts into one home loan is not for everyone. For instance, using your equity to have the equivalent of a 30-year car loan is rarely a great idea. But it may work if you have the discipline to take advantage of a low rate to speed up—rather than slow down—payment terms. Consolidation can make debts disappear with less total interest expense than they would otherwise.

Homeowners’ Equity is On the Rise

Now could be a great time to cash-out home equity and pay off debts. According to CoreLogic, equity levels rose by nearly 30% between 2020 and 2021. Plus, believe it or not, mortgage rates are still low. Qualified homeowners may be able to significantly lower their debt payments and increase their monthly cash flow by using a cash-out refinance.

Homeowners looking to refinance to pay off debt must make sure they have enough equity. For instance, if 80% of the home’s value is owed after you refi, you’ll have to buy mortgage insurance. This is something you’ll want to avoid.

How to Calculate Your Loan to Value (LTV)

How is an LTV calculated?  Simply divide your current mortgage balance by the approximate value of your home to get your loan to value ratio.

How to Qualify for A Cash-Out Refinance

Lenders usually check to see that you have a credit score of 620 or higher and enough equity in your home that you can keep 20% equity after the refinance.

Reason to Use a Cash-Out Refinance to Consolidate Debt

One of the main reasons homeowners consider using a cash-out refinance to consolidate debt is that you can typically get a lower rate on a mortgage loan than you can with personal loans. Some other benefits can include:

• Paying off high-interest debt faster
• Frees up extra cash for other expenses
• Consolidating debt makes it easier to manage monthly payments
• Mortgage Interest may be tax-deductible (always consult a tax or financial planning professional to discuss your specific situation)

Bottom Line:

If you have high-interest debt hanging around and eating away at your monthly budget, a cash-out refinance may be the solution you’re looking for. This will allow you to reduce your monthly payments but also frees up extra money for living expenses, savings, and beyond.

Questions?

Talking about your options with a member of our dedicated loan team can help you make the best decision for your specific scenario. Speak with one of our expert Loan Officers to explore what a good consolidation plan could mean for you.

 

Buying a home is certainly one of the biggest financial investments you’ll ever make. Keeping a home as comfortable and up to date as possible is key to loving the home you’re in. However, sometimes it’s difficult to come up with extra cash for home renovations and repairs. If you find yourself in this position, you may want to consider a cash-out refinance which allows you to tap into your home’s equity.

A cash-out refinance has many benefits and so much to offer. With a cash-out refi, you can renovate your home, consolidate high-interest debts into a single, low-interest loan, buy that dream vacation you’ve been longing for and so much more. Continue reading and we’ll uncover the benefits of a cash-out refinance so you can determine if one is right for you.

What is a Cash-Out Refinance?

A Cash-Out Refi is designed for homeowners who have an existing mortgage and want to refinance to get cash in hand at the time of closing. This is achieved using the equity in your home.

What Does it Mean To Have Equity In Your Home?

Basically, having equity means that you have cash value built up in your home. It is the difference between what you own on your mortgage and what your home is currently worth.

Take for instance if you owe $150,000 on your mortgage and your home is worth $200,000, you have $50,000 in equity in your home.

Equity grows year by year as you pay down your mortgage and as your home increases in value. Don’t think of equity as liquid cash. Instead, to put the money to work, you need to convert home equity into liquid cash.

How Does a Cash-Out Refinance Work?

A cash-out refi will replace your existing mortgage with a new home loan for more than you owe on your home. The difference goes to you in cash, and you can spend it on things such as home improvements, paying off debts, or other financial needs.

Cash-Out Refinance Benefits

Some advantages of a cash-out refinance include the following:

#1 Lower Your Rate: This is the most common reason. These types of refinances typically have lower interest rates. Plus, rates are still near historic lows, making this a great time to take advantage of a cash-out refi.

#2 Your Cost to Borrower Could Be Lower: A cash-out refi is normally a less expensive form of financing because mortgage rates are typically lower than rates on personal loans or credit cards.

#3 Improve Your Credit Score: Need to pay off debt? If you use the funds from a cash-out refinance to pay off debt, you may be able to boost your credit score if your credit utilization ratio drops.

#4 Tax Deductions: A cash-out refinance may be eligible for mortgage interest tax deductions if you’re using the funds to improve your home. More on this later.  

#5 Increase Your Home’s Value: Think about reinvesting the cash you get back into your home. Any cash you put towards repairs and improvements could increase your home’s value.

#6 Use Cash However You Want: A cash-out refi can help you eliminate high-interest debt, pay for education, pay off a wedding, buy your dream vacation, build a home office or gym, and so much more.

Let’s Talk Taxes

As we mentioned above, a cash-out refinance may be eligible for mortgage interest tax deductions if you use the funds to improve your home. What do these deduction-eligible projects include? They include things such as permanent addition and home improvements that increase the property’s value and extend its longevity. You’ll need to prove you’re using the cash in a way that qualifies when you file your taxes. Make sure to save receipts and other important paperwork associated with your projects.

Here are some Deduction-Eligible Projects:

• Adding a Pool or a Hot Tub

• Constructing a New Bedroom or Bathroom

• Building a Fence Around Your Home

• Replacing a Roof

• Upgrading Windows

• Setting up a Central AC or Heating System

• Installing a Home Security System

• And more

Keep in mind that capital improvements are defined as permanent additions that will increase the value of your home. Repairs such as fixing a broken window or painting a room do not count. Have questions regarding what projects may be eligible when it comes to tax time? Reach out to us and we’ll let you know.

Bottom Line:

With rates currently still low, now might be a uniquely good time to tap into your homes’ equity. Reach out to the experts at Greenway Mortgage to discuss your options.  

 

The value of most homes has been on the rise. If you’re in need of cash to replace the roof, update the kitchen, pay for education, or help finance a new place for the kid who’s back from college and living rent-free in the basement, your home's rising value may provide the leverage you need to make it happen!

When homeowners inquire about accessing cash from their homes, they’re often thinking about getting a Home Equity Line of Credit (HELOC). However, there’s another way homeowners can get cash from their home and that’s by choosing a cash-out to refinance instead.

In the current environment, many people want to keep the great interest rate they already have on their home loan, so they automatically choose a HELOC over a refinance. But wait—there’s a big difference that can make the benefits hard to compare at a glance. We’ll explain.

Is it better to use a Home Equity Line of Credit or to do a "Cash-Out" Refinance despite a higher interest rate?

When we suggest they look into refinancing instead, even if it’s at a higher rate than they pay on their current mortgage, they stop listening and consider us crazy! But hear us out…

Believe it or not, there are times when a higher fixed rate can be a great idea and a far safer choice. The simple reason is that rates on HELOCS are usually adjustable and based on the prime rate as influenced by the federal reserve board. Rates have been low for years, but they typically move in cycles. In the past, they’ve been anything but low peaking at more than 20%.

HELOC vs. Cash-Out Calculator

Not everyone loves math, but a little of it can be your friend when you want to use your money wisely. Besides, we’re doing the hard work for you! Using this calculator, you’ll be able to see how taking cash out with a fixed rate loan compares with using an adjustable rate HELOC.

Simply plug in the numbers for the amount of cash you might like for both a HELOC and again as an amount over your current loan balance, set the rates, and there you go – an instant payment comparison.

Don’t just look at the comparison today. The real benefit of a fixed rate is not always obvious in the beginning. To see what happens if rates rise further tomorrow, move the slider on the HELOC loan and watch how high that payment can climb.

HELOC loans have their place and so does the peace of mind that can come from a fixed rate loan with a principal and interest payment that will never change.

Go ahead, give it a try!

 

If you’re planning on selling your house in 2022 or if you’re looking to tackle some home renovation projects, we’ve got the top renovations that will give you the highest return on your investment.

Find out what’s trending this year and learn about our Home Renovation Mortgage Loans.

Landscaping

We’re putting this one at the top of our list. You’ve probably heard the phrase a time or two that “first impressions are important”. This is true especially when it comes to selling your home. Curb appeal says a lot about your home, and it offers a tremendous return.

According to HGTV, landscaping is one of few improvements from which homeowners can expect a 100% return on their investment. The average amount spent on landscaping is around $5,000 and most of this is recouped when a home is sold. Since the pandemic, buyers are very interested in outdoor spaces. So, if you’re thinking about sprucing up your outdoor space, we highly recommend doing just that!

Bathroom Remodel

If your bathroom could use some updating, we’ve got some good news. For a midrange bathroom renovation, you could see a 60.1% return on your investment for upgrades like replacing fixtures, adding a ceramic tile bathtub, and a new vanity top according to Bob Vila.

Kitchen Remodel

Kitchens are a huge selling point and one of the most expensive rooms to remodel fully, but a minor kitchen renovation can get you a 72.2% ROI according to Bob Vila. Think about replacing old cabinet doors and drawer front, replacing old hardware, add new countertops and a kitchen sink. If you’re going all out, a full remodel nets only a 57.4% return.

Garage Door Replacements

The garage door is another feature that potential home buyers will notice first. According to an article from BobVila.com, the cost to replace a garage door is around $3,900, which makes the ROI 93.8%.  

New Hardwood Floors

Dollar signs start adding up when buyers see flooring they know they’ll need to replace anyway. If you want a top-dollar return, new hardwood floors are key. According to real estate experts, the average ROI for installing hardwood floors is about 70% to 80%, and wood floors can boost the sales price of your home by as much as 2.5%.

New Front Door

Speaking of curb appeal, a new entry door is a crucial part of a home’s perceived value. According to Remodeling Magazine, investing in a new front door has an average ROI of 74.9%.

Window Replacement

Replace your old drafty windows with energy-efficient windows. This can give you an ROI of about 68.6%.

Adding A Deck

Outdoor spaces are a hot item these days! Adding a deck to your home is a smart way to increase your home’s value. According to Bobvila.com, Wood decks are the most popular and net homeowners an average of 66% ROI. If you’ve been longing for a deck, now is a great time to take action!

New Vinyl Siding

Give the exterior of your home the fresh, clean look it deserves. Your house is guaranteed to have the best curb appeal on the block with new vinyl siding. According to Keeping Current Matters, the ROI on new vinyl siding is 63%.

New Roof

If you’ve ever been house hunting before, we’re certain you’ve taken notice of the roof’s condition. Most buyers will push pause on a home if the roof needs to be replaced. It is one of the biggest factors in determining the overall value of a home. According to First Star Exteriors Roofing and Siding, a new roof will likely give you an ROI of about 60-68%, depending on the condition of your old roof and the quality of materials used.

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Greenway’s Home Renovation Loans

If a home renovation is on your road map this year, you may want to consider a Home Renovation Loan from Greenway Mortgage. Whether your home improvement projects are large or small, a renovation loan can help you get the job done and it’ll improve the overall value of your home as well.

Although you may be able to pay for home improvements with a personal loan or other types of financing, these methods have higher interest rates and monthly payments.

Instead, you can combine the purchase price plus the renovation costs into one mortgage payment or refinance your existing mortgage plus construction costs into a new mortgage. Our renovation programs make it easy for you to improve your property by including the extra financing in a purchase or refinance loan.

Our Renovation Loans Include:

• FHA 203 K Program
• Streamlined 203K
• Standard 203K
• HomeStyle

If you’re interested in learning more about how a Renovation Loan can help you, contact us today or visit our website here.

 

Did you know that interest savings may be hiding in your mortgage?

When you think of a mortgage loan, you typically think of interest costs. But if you consolidate other debts into your mortgage, you can start thinking of interest savings instead.

Most consumer debt carries a higher interest rate than home financing. If you access cash to pay off some of those debts – even at a slightly higher interest rate than your current mortgage – you can still save on overall interest expenditures.

And if you use your monthly savings to pay extra on your principal each month, you can pay off your mortgage faster and save even more.

Try Our Debt Consolidation Calculator

We have a Debt Consolidation Calculator that you can use to determine how much interest you’re currently paying. In addition, you’ll be able to see how much you can save with a new consolidation loan!

Have Questions About Debt Consolidation?
If you want to talk through your scenario, please reach out to the experts at Greenway Mortgage.

Our team is happy to assist you with any questions you may have!