Homeowners looking to refinance a mortgage at CBC National Bank Mortgage may do so for a few reasons. Perhaps the goal is to achieve a lower interest rate or a shorter mortgage term. Other homeowners refinance to change types of mortgages, such as from a fixed-rate to an adjustable-rate mortgage. Still others are simply looking to consolidate debt or use accumulated home equity to make home improvements that could increase the home’s value.
While two refinancing options exist, each has the same basic function – to pay off the existing home loan and replace it with a new one with the homeowners’ preferred characteristics. Whether you choose a rate and term refinance or a cash-out refinance depends on your motivations for refinancing in the first place. If you primarily want to reduce your rates or shorten the term of your mortgage, rate and term refinancing may be for you.
If you wish to access your home’s equity, a mortgage cash out likely fits your needs. Fortunately, CBC National Bank Mortgage offers mortgage cash-out refinancing for all categories of homeowners. Read our FAQ to determine if a cash out refinance is right for you.
1. How do cash-out refinances work?
You’ll refinance your mortgage essentially by receiving a new mortgage with a higher balance than your old one, using the equity in your home. Then, you’ll use the new amount to pay off the old mortgage and keep the difference.
2. What is home equity?
Home equity is defined as the current market value of your home, minus the amount of your home loan left to pay. For example, if your home is appraised at $400,000 and you owe $200,000 on your mortgage, your home equity is $200,000. Your home equity increases as your home appreciates in value over time and as you pay down your mortgage.
3. How does CBC determine my refinance amount?
Your refinance amount is the amount over and above the original loan amount CBC National Bank Mortgage will set for your new loan. Typically, banks make loans anywhere between 70 and 80% of your home’s current appraised value. To use the previous example, if your home appraisal is at $400,000, the new, refinanced loan would be between $280,000 and $320,000. If your current loan is a VA loan, you can get up to 100% of your appraised value, while FHA loans refinance at 85%.
4. How do I calculate my cash out?
Although the cash received from a cash out refinance can be used any way the homeowner desires, many people pursue cash-out refinances in order to pay down credit card debt, begin home improvements without taking out an additional personal loan, or pay for large expenses like college tuition.
4. Why do homeowners choose a cash-out refinance?
In most cases, since your loan amount increases to reflect both the principal and your cash out, your mortgage payment will increase. The amount of the increase will depend on your new interest rate as well as the amount of your new loan.
4. How will refinancing affect my monthly mortgage payment?
To calculate your cash out, contact your CBC National Bank Mortgage loan officer. They can accurately gauge the cash out amount by ascertaining the remaining value of your original loan and subtracting it from the refinanced loan.
4. How will refinancing affect my interest rate?
CBC National Bank Mortgage will look at the current market, your credit score, the ratio between your current loans and the product value, and your current interest rate to determine your new rate.
If you are looking to obtain cash to pay down credit card debt, pay off a large expense, or begin a new home improvement project, a cash-out mortgage refinance through CBC National Bank Mortgage can provide you with the desired cash at a great rate. Since a number of personal factors go into determining the loan that’s best for you, be sure to contact a loan officer for more information.