Cash-out refinance is a type of mortgage loan that lets borrowers exchange some of the equity in their homes for cash.
Cash-out refinance is a popular choice for homeowners looking to finance large expenses. Popular uses of cash-out refinance funds include:
- Unforeseen medical expenses
- Weddings and honeymoons
- Home renovations or other upgrades
- Consolidate debt into a single, more affordable monthly payment
If you’re a Georgia resident, is a cash-out refinance a good idea? Let’s look into it.Check your cash out eligibility
What is a cash-out refinance and how does it work?
A cash-out refinance in Georgia works in much the same way a traditional refinance home loan in Georgia works. Both loans replace your current mortgage with a new one.
The new mortgage will often have better, lower interest rates, reduced monthly mortgage payment amounts, or more suitable terms.
The new mortgage repays your first home loan completely, and you make payments on the new mortgage.
With a cash-out refinance mortgage, your new home loan will be for more money than your existing mortgage, and you’ll receive the difference, the money that’s left over, as a lump sum payment.
Let’s look at an example of a cash-out refinance in Georgia
A home has an assessed value of $350,000, and $150,000 is still owed on the current mortgage. The borrower can get up to $130,000 cash out.
Most cash-out refinance lenders allow homeowners to use up to 80% of the equity in their home for a cash-out refinance mortgage. It is calculated as follows:
$350,000 x 80% = $280,000
$280,000 -$150,000 (balance) = $130,000 (cash out)
As a homeowner in Georgia, you can use the funds from a cash-out refinance loan for anything you consider worthwhile. There are no restrictions on how you can spend the money from a cash-out refinance in Georgia.
Are the limits to how much I can get with a cash-out refinance in Georgia?
Most cash-out refinance lenders allow homeowners to borrow up to 80% of their home’s assessed value.
As stated in the example above, with a home that has an assessed value of $350,000, you could expect a cash-out refinance maximum of $280,000, but need to take into consideration the balance owed on your current mortgage.
Are cash-out refinance rates in Georgia higher than no-cash-out refinance?
No. The cash-out refinance rates you’ll receive will be based on several factors, such as how much debt you have, the equity in your home, and market activity, to name a few.
But of all the factors considered, your credit score and credit history will have the biggest impact on the interest rate you receive.
The better (higher) your credit score, the better (lower) your refinancing mortgage rates will be.
To find out your credit score, consider getting a copy of your credit report. Go over the information carefully and check for any mistakes or inaccuracies.
Life in Georgia is better than ever
Bordered by South Carolina, the Atlantic Ocean, Tennessee, Florida, and Alabama, Georgia offers some of the most impressive scenery in the country.
The Peach State’s almost 11 million residents enjoy caves and Lookout Mountain as part of the Appalachians to the northwest and the resort-like beaches of the east coast. And almost everything in between.
Since 2010, The Peach State has experienced solid population growth of more than 10%, and it’s estimated that it will top 12 million in less than ten years.
Why Georgia is a prime area for a cash-out refinance
With so many new residents to the state, it’s easy to see why home values have risen dramatically. Today, the average cost of a home in Georgia will set you back $323,991, a jump of 21.6% since just last year.
And that’s great news for Georgia homeowners.
Homeowners can build equity in their homes by:
- Making regular payments on their mortgage (each payment contributes to your home equity)
- Home values increasing
The rise in home values in Georgia means homeowners are sitting on an asset worth more today than last year.
Think of it this way, if your home’s appraised value last year was $200,000, it could be worth up to 21%—or $42,000 more—and that’s added equity you can tap into with a cash-out refinance home loan.
When it makes sense to get a cash-out refinance
Many homeowners consider a cash-out refinance if they want to take care of a debt, pay for a significant purchase, or improve their overall financial situation.
While some homeowners use the money from a cash-out refinance in Georgia to consolidate credit card debt and save money on interest charges, others may use it to improve their homes or pay for a family vacation.
Each homeowner’s situation is unique, and the decision of how to use the money from a cash-out refinance will depend on your specific situation.
The most important thing to consider when thinking about cash-out refinance in Georgia is whether you can safely afford the monthly payments. Because a cash-out refinance uses your home as collateral, your lender could start foreclosure if you fail to repay the loan.
Do I qualify for a cash-out refinance in Georgia?
Qualifying for refinancing is similar to the process you first went through to get your existing mortgage.
While eligibility requirements vary by lender, most lenders require a minimum of 20% home equity to qualify for a cash-out refinance loan in Georgia.
Your debt-to-income ratio (how much money you spend paying off current debts each month), credit score, job history, and income are also taken into consideration.
Because their situation has improved since applying for their current mortgage, many homeowners can get a better interest rate and lower monthly payments by refinancing.
Apply for cash-out refinance in Georgia
Whether you’re considering a cash-out refinance in Georgia or are interested in buying your first home, AAA Banking is here to help.
We make it easier than ever to get the information you need for every step of the homebuying journey.
Our HomeScout home search program helps homebuyers find their dream home, and our licensed loan officers are available to answer any questions about any part of the mortgage process.
Apply online today, or call us at (844) 897-2265 M-F; 8a-8p EST.
Photo by Curtis Adams