In simple terms, a cash-out refinance allows you to borrow more than your home loan amount and receive the difference in cash.
With this, you’re accessing equity which you can use to pay for expenses such as home repairs or renovations, major life events, or tuition among others.
While the real estate market has been turned upside down since the onset of the global pandemic, it’s still one of the best times in recent years to opt for a cash-out refinance.
This is particularly true in the state of Indiana. The cumulative appreciation rate in Indiana over the last decade has been 82%.
So, if you own property in the Hoosier State, there’s a good chance that you’ve gained equity. And in that case, you’re in a position to at least consider a cash-out refinance.
Reasons to get a cash-out refinance in Indiana
There’s no shortage of reasons to apply for a cash-out refinance, but it will ultimately depend on your unique financial situation and goals. Let’s look at some common reasons why borrowers get a cash-out refinance.
1. Lower interest rate
Depending on your current mortgage rate and what you’re eligible for, you may be able to lower it. Doing so will save you money every month, as well as over the life of your loan.
2. Improve your credit score
If you use the equity in your home to pay off debt—such as lingering credit card balances—it can have a positive impact on your credit score. This positions you for greater financial success in the future.
3. Tax deductible
Your mortgage interest payments may be tax deductible. Discuss this with your tax professional to determine if you’re eligible.Start your cash-out refi here
How to use the cash from a cash-out refinance
When compared to a traditional refinance, a cash-out refinance gives you access to the equity in your home. Before you apply, have a clear idea of how you’ll use the cash.
1. Home repairs or renovations
Are you interested in expanding the size of your home? Do you want to finish your basement? How about gutting your kitchen? All of these things require a large investment.
A cash-out refinance allows you to take on the project without the high-interest rate associated with a credit card or personal loan.
2. Debt consolidation
Review your current debt load to determine if there’s an opportunity to consolidate it.
- Do you have more than one credit card balance?
- Do you have a personal loan? Home equity loan? Home equity line of credit?
- Do you have medical debt? Student debt?
Consolidating your debt can save you time and money, reduce your stress load, and boost your credit score.
3. Major life events
There are times in your life when you need an influx of cash for an expense. This could be anything from a wedding for your child to a dream vacation with your spouse.
You only live life once. Don’t be shy about using the equity in your home to pay for a once-in-a-lifetime event.
4. Education expenses
The best investment you can make is an investment in yourself. And one of the best ways to invest in yourself is by bettering your education.
Tuition, books, and school supplies are expensive. A cash-out refinance may allow you to pay for some or all of these education expenses.
5. Start a business
Many people dream of starting a business, but some never take action due to a lack of funds. You may not have enough cash on hand to start a business, but equity in your home can more than make up the difference.
An example of a cash-out refinance in Indiana
Let’s say that a home has an assessed value of $500,000, and $250,000 is still owed on the current mortgage. Most lenders allow homeowners to borrow up to 80% of their home’s assessed value. That would mean your cash-out refinance would be calculated as follows:
$500,000 x 80% = $400,000
$400,000 -$250,000 (balance) = $150,000 (cash out)
The cash is typically deposited straight into your account. But lenders are required to allow you three days to choose to back out of the deal before the cash can be deposited.
There’s a lot to like about life in Indiana
Indiana is known for many things, ranging from its love of basketball to the size of its automotive industry. Furthermore, it offers many styles of living, from big cities like Indianapolis to small towns.
A few other points of interest include:
- It’s the 17th-most populous state (6.806 million)
- It’s the 38th-largest state by area
- It’s home to the NFL’s Indianapolis Colts and the NBA’s Indiana Pacers
Why Indiana is a prime area for a cash-out refinance
The median home value in Indiana is $148,700 and the average outstanding mortgage balance is $120,567. If you already have equity in your home, you can continue to build it in three ways:
- Make regular mortgage payments
- Make additional principal payments every month
- Watch home values increase
As you do these things, you’ll come to realize that you’re in a better position to qualify for a cash-out refinance in Indiana.
Do you qualify for a cash-out refinance?
Qualifying for a cash-out refinance is similar to the process you completed to get your existing mortgage.
Eligibility requirements vary by lender, but here are some that are generally the same across the board:
- A minimum of 20% home equity
- A credit score of approximately 620 or higher
If all of these factors work in your favor, there’s a much greater chance of approval.
Applying for cash-out refinancing in Indiana
Whether you’re seeking a cash-out refinance in Indiana or have your sights set on buying a new home, AAA Banking is here to help.
Getting started is as simple as providing your ZIP code and following a few basic prompts.
And with the guidance of our HomeScout home search program, you have all the help you need to find your dream home.
It’s our goal to provide you with exceptional service from start to finish.
Apply online today, or call us at (844) 897-2265 M-F; 8a-8p EST.
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