Six Interesting, Unique, and Fun Reasons to Use a Cash-Out Refinance
The cash-out refinance is one of the best ways to get a quick injection of cash. Most of the time, this form of mortgage refinancing, which converts equity into available cash, is used for fairly basic and straightforward purposes.
Most people who utilize a cash-out refinance will use the proceeds for home repairs and maintenance. This makes sense, as you are taking equity out of the home and, in the form of remodeling and repairs, putting it back into the property.
But renovating the house is far from the only reason to use a cash-out refinance. In fact, there are interesting, creative, unique, and (dare we say it?) fun reasons to use a cash-out refinance.
From new toys to organizing your debts, these are a few of the main reasons why you might utilize a cash-out refinance.
6 Unique Reasons to Use Cash-Out Refi
1. A Career Change
A career change, for most people, is exciting and interesting. Whether you are shifting positions within a company or joining and entirely new industry, it’s a chance to start a new role and, perhaps, earn a larger income.
But sometimes a career change can create financial troubles. It’s possible that your new income may not start for a few months, which means you’ll need some available cash to get through the lean times. Or perhaps you are starting a position that will actually pay less; until you can organize your finances to reflect your new income, a cash-out refi can help you through.
Regardless of your reasons, regardless of your new positions, if you are starting a new career you may want to consider utilizing a cash-out refinance.
2. Launch a New Business
Sometimes a new career doesn’t mean taking a new job for a company, but instead creating your own business. Starting your own business gives you more freedom and control over your own work. It’s never easy, but many people who start their own never go back to working for someone else. Despite the challenges, being self-employed is just too rewarding.
But starting a new businesses can cost money. You may need cash for equipment or marketing to get the business off the ground. You may need cash for a new location, or to file the proper paperwork with local authorities. Some are cheaper than others, but it can cost tens of thousands of dollars to launch your business.
With a cash-out refinance, you can get the cash you need for a new business without using costly credit cards and other loan options. Because a cash-out refi is tied to your home, you’ll get the money you need for refinancing at (in most cases) a much lower rate.
3. Pay for College
Whether you need to fund your own education, your spouse’s, or one of your children, paying for it with a low-interest refinance is often a much better decision. It’s often far more appealing than taking out a student loan that usually has a higher rate.
It’s not just the rate that makes cash-out refinancing more attractive than student loans. With a cash-out, you can repay the money over a 15- or even 30-year period, depending on the details of your new loan. Most student loans are repaid over a shorter period, usually about 10 years, so the monthly payment will be much higher.
4. Consolidate Your Debts
To be clear, a cash-out refinance can’t actually eliminate your debts. However, you could use it to pay off credit cards, car loans, and even student loans and roll some or all of them into your mortgage. This can be a useful way to consolidate and simplify your debts, creating a much more manageable debt load.
Suppose you have $150,000 in debts, which includes a variety of consumer debts, car loans, and other financial obligations. But you also have a mortgage on your home and about $300,000 in equity. With cash-out refinancing, you could refinance your current mortgage and get an additional $150,000 to pay off your current debts. This would essentially transfer your debts from all the little accounts (credit cards, auto, etc.) and roll them into your home, which should allow you to enjoy a much lower interest rate and possibly extend the terms so the monthly total is less.
5. Buy Something Fun!
It doesn’t all have to be boring old debt consolidation and college payments. (Although those can be exciting as well!) A cash-out refinance can be used for a little fun! Perhaps you’ve wanted to purchase a ski boat or a motorcycle. Perhaps you’ve wanted to take a European vacation, but haven’t been able to connect the financial ends.
Regardless, a cash-out refinance can help secure the funding for these little adventures or toys. You can make the purchase while avoiding the high interest and large payments of consumer financing.
6. An Investment or Vacation Property (Or Both)
If you have equity in your home, why let it sit idle? Instead, you can take that equity and use it to purchase another property, one that can be used as a personal vacation getaway or as a boost to your investment portfolio.
Suppose you have $100,000 in equity. With a cash-out refinance, you could convert that equity into cash, then use the cash as a downpayment on an investment property or vacation home. This allows you to leverage the benefit of property ownership, building your portfolio and enhancing your overall financial future.
The property options, of course, are vast. You could use the proceeds from a cash-out refinance to purchase a strict investment property, perhaps a duplex or even a commercial space. Or you could use it to purchase a vacation home, perhaps something near a beach or ski resort. This little vacation home could then be used for your personal enjoyment and as a part-time rental. The options are limitless.
Find Out if a Cash-Out Refinance is Right for You
Do you have a high interest rate on your mortgage? Have you built equity but need cash for school, home repairs, or unexpected bills? Contact our team today to learn more about the benefits of cash-out refinancing.