Do you own a home in the state of Tennessee? Do you know how much equity you have in your property? Are you wondering how you can use that equity to your advantage?
If you answered yes to these questions, it’s time to learn more about a cash-out refinance in Tennessee.
A cash-out refinance allows you to borrow more money than your home loan amount, receiving the difference in cash. You can then use the difference in any way you see fit.
There are two simple steps you can take to start the cash-out refinance process:
- Determine if you have equity in your home. This is the difference between its value and the balance owed.
- Contact a lender that specializes in cash-out refinance loans in Tennessee.
Upon taking these steps, you’ll gain a better understanding of your situation and the best path forward.
Start your refinance application.Reasons to get a cash-out refinance in Tennessee
Everyone has their own reason for considering a cash-out refinance loan. The following are some of the most common scenarios.
1. Secure a lower interest rate
Once you know your current mortgage rate, compare it to what you’re being offered by lenders for a cash-out refinance. Securing a lower rate can save you thousands of dollars over the life of your loan.
2. Tax deductible
Consult with your tax professional about whether interest payments are tax deductible. If they are, it’s a great way to reduce your annual tax liability.
3. Improve your credit score
Many people use a cash-out refinance loan to pay off debt. Doing so has the potential to increase your credit score. Think about your outstanding debt that you can consolidate.
How to use funds from a cash-out refinance
This is a personal decision and there’s no right or wrong answer. You can use the funds from a cash-out refinance however you best see fit.
Before you apply for a cash-out refinance, have an idea of how you want to use the funds. Going into the process without a clear vision could lead you to spend the funds unwisely.
1. Debt consolidation
This is one of the most common ways to use funds from a cash-out refinance. Use it to pay down debts such as credit card balances and personal loans. Not only does this make your debt load easier to manage, but it can boost your credit score.
2. Home renovation projects
Why not use the equity in your home to gain equity in your home? Some projects that have the best return on investment include:
- Kitchen renovation
- Bathroom renovation
- Finish your basement or attic
- Add an outdoor living space
If you plan to use a cash-out refinance to fund a home renovation project, consult with a contractor beforehand.
3. Education
The biggest investment you can make is an investment in yourself. And for many people, that means continuing education. For example, you can use the funds to pay for college tuition and related expenses.
4. Start a small business
Starting a small business can be expensive, so you need capital to get started. There are many options available, including cash-out refinance.
Compare the pros and cons of this option to credit cards, a loan from family or friends, a personal loan, and a home equity line of credit among others.
5. Travel
For some people, the biggest joy in life is traveling the world. The only thing holding them back is a lack of money. If this sounds familiar, the funds from a cash-out refinance can help.
An example of a cash-out refinance in Tennessee
Now, let’s look at a real-life example of how a cash-out refinance works.
Let’s assume that your home has an assessed value of $300,000 and you still owe $100,000 on your current mortgage. You could get up to $140,000 cash from your equity.
Note: Most lenders only allow you to borrow up to 80 percent of your home’s assessed value.
Tennessee facts and figures
- Population: 6.975 million
- Tennessee is the 36th largest state by area
- Nashville is the state’s capital and largest city
As for the most populous cities in Tennessee, the top five are:
- Nashville
- Memphis
- Knoxville
- Chattanooga
- Clarksville
Of course, it doesn’t matter where you live—in a large city or a small town—you have the opportunity to apply for a cash-out refinance.
Why Tennessee is a prime area for a cash-out refinance
According to Redfin, home prices in Tennessee were up 7.9% year-over-year in October 2022.
That’s an important number because it means that your home likely increased in value from 2021 to 2022. When combined with paying down your mortgage, you probably gained more equity in your home.
Once you know how much your home is worth and what you owe, you can use a refinance calculator to calculate your new monthly payment.
Start your refinance today.Cash-out refinance eligibility requirements
Qualifying for a cash-out refinance is similar to a traditional mortgage. Most lenders require the following:
- A minimum of 20% home equity
- A credit score of 620 or higher
- A debt-to-income ratio (DTI) of 40% or lower
If you meet all these requirements, there’s a good chance you’ll be approved for a cash-out refinance.
Get started today with AAA Banking
At AAA Banking, we make it simple to apply for a cash-out refinance.
Get started on our website or contact one of our loan officers via phone at (844) 897-2265 M-F; 8-8 EST.
One of our experienced team members can answer your questions, walk you through the process, and help you decide if a cash-out refinance is right for you at the present time.
PS: AAA has partnered with HomeScout to help you find your dream home in Tennessee. Find your dream listing and the best agent right on the app.
Photo by Alexander Mils