You will be able to repay the old loan through cash-out refinance and get cash at the same time. Refinance is a type of mortgage that is paid on your home equity and you will be given a check at closing. The cash you get from a new loan is bigger than the old loan and any kind of closing costs are rolled out in the loan.
There are no restrictions on where and for what purpose you make cash. With cash, you can cover the biggest expenses as well as repair or renovate your home.
You must have sufficient equity available in your home to qualify for cash-out refinance. You will receive cash against the equity available in your home.
For example, the current value of your home is $ 200,000 and your existing mortgage is $ 100,000. Then the equity available in your home is $ 100,000. Since you can borrow 80% of the available equity, your cash balance will be $ 60,000.
The equity available in your home after refinancing must be 20%. So you will be given a check for $ 60,000 after paying off your old mortgage but this does not include closing costs. Closing costs are 2% to 6% of your loan amount that is rolled into debt.
However, which loan is right for you depends on the equity available in your home, your situation, the amount of the mortgage and your eligibility.
The cash-out refinance closing process
Cash-out refinance closing process is similar to other conventional cash-out refinance closing process. However, you need to know a few things about the closing of cash out refinance.