While building wealth can require complex strategizing and attention to detail, many principles are pretty simple. Among them is to try and minimize the interest you owe on your loans and lines of credit. Maybe you need to take out a loan to fund your business, or perhaps you need to borrow to cover home remodel repair costs or other significant expenses.
If so, you may be tempted to apply for an easy personal loan, line of credit, or use a credit card to cover your costs. However, the interest rates on personal loans, credit cards, and small business loans can be high and are often adjustable. The more interest you need to pay, the longer it will take you to pay off the loan or credit card balance, and the more expensive it will be. A more cost-effective alternative may be to refinance your mortgage.
Mike Peacore, the owner of Blue Square Mortgage, explains, “Rates have gone up, but financing your home is still one of the lowest long-term options and certainly lower than a credit card, personal and business loans. I encourage small business owners to consider refinancing their home and lend money to their business to save money rather than taking out expensive business loans.” Blue Square Mortgage works with customers to refinance their mortgages in Washington State and Colorado.
You Can Also Consolidate High-Interest Debt by Refinancing
If you already have some high-interest debts, a cash-out can help you save on those. We frequently plan to pay these high-interest credit cards or lines of credit off quickly but find that is not possible. If you plan to hold a balance on these high-interest rates for more than a year or two, your best option may be to refinance and consolidate your debt. You can use some of the cash you receive from the refinance to pay off those high-interest debts. You consolidate them into your mortgage and have that one lower-interest debt to pay off.
Should You Get a Cash-Out Refinance?
If you need to borrow money, a cash-out can be more cost-effective than taking out a personal loan or relying on a credit card. You will usually pay a lower interest rate, plus your debts will be consolidated. But is it the right fit for your situation? Let’s talk about scenarios where a cash-out refi might be in order and any potential disadvantages you should know about.
A Cash-Out Refinance May be Right For You If:
- You meet the qualification requirements for a refinance. Your credit score, debt-to-income (DTI) ratio, and equity will all be considered. The amount of time that has passed since your house purchase may also be relevant.
- Rates have gone down, and your qualifications have improved since you initially took out your home loan. Refinancing in this scenario will help you get the cash you need and potentially help you pay less interest in the future on your mortgage.
- You want to take a streamlined approach to finance. With a cash-out refi, you have a single payment to make each month.
- You want to consolidate existing debts. Even if you do not need to borrow money to pay off any new expenses, you might already be paying off high-interest debts. You can pay these off by getting a cash-out to refinance, leaving you with just one debt with a lower interest rate.
- You want to increase your credit score. This might be possible if some of the high-interest debts you wish to pay off involve lines of credit. Your credit utilization ratio will drop after consolidating your debts.
Find Out if a Cash-Out Refinance in Seattle Can Help You Achieve Your Financial Goals
If you think a cash-out refinance might be the right move for you, we can help. During your consultation, you can describe your financial scenario, and we can quickly help you determine if refinancing your home is a good option. We can then decide whether a cash-out refi could help you save money and achieve your financial goals. To get started now, please call Blue Square Mortgage at (206) 352-6453. They work with homeowners in Seattle and throughout Washington State and Colorado.
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