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By Robbie T. James
Originally, home mortgages were simply convenient ways for people to get moved into a home right away without being able to afford paying cash for the whole thing. In other words, they were simply loans.
Over time, however, people have begun to view their mortgages as opportunities. The two most significant opportunities represented by mortgages today area: a. as an investment to increase one’s net worth over time, and, b. as a giant piggy bank from which to borrow money.
When you have built up enough equity in your home, you actually have the opportunity (under the right conditions) to borrow against that equity in the form of a cash loan. You can accomplish this by taking out a home equity loan, which is a loan borrowed at a higher interest rate than the rate you are paying on your first mortgage.
The second way is to refinance your first mortgage at a higher loan amount than that of your existing mortgage and then to pocket the resulting cash (the unused portion that remains after you pay down your existing first mortgage). This is sometimes called a cash-out mortgage.
If you are looking for the best cash-out mortgage refinance rates, here are 5 tips for securing the best rate:
1. Decide how much cash you really need:
It goes without saying that the less you borrow in your cash-out mortgage refinance, the less you will have to pay back late .. . and the lower your monthly payments will be. Not only that, but your loan will cost you less over time in terms of the interest you have to repay. And maybe most importantly, you could qualify for a lower interest rate since your resulting loan-to-value (LTV) ratio will be lower.
That said, do yourself a favor and calculate how much money you will need – then borrow that amount but no more than that. There is no sense in borrowing the maximum amount you can against your home equity if you don’t need to.
2. Figure out how much equity you have in your home today:
To determine whether you can really borrow as much as you want to borrow in order to be able to receive the cash you are seeking, you will need to know your home equity. To figure this out, start by getting your house appraised – or at least have a realtor friend run the comps on your house to see what similar houses nearby are selling for. Then, subtract from that the current outstanding principal on your mortgage.
3. Have a look at your latest credit score:
You should only move forward with the cash-out refinance if you can qualify for an interest rate that is the same or lower than what you are paying now. One important factor that will determine the rate you qualify for is your credit score. So, run your credit score and see whether it has gone up or down since you last ran it.
4. Review recent interest rate trends:
Also, get a sense for where average mortgage interest rates are today from an historical perspective. Are they up, the same, or down relative to when you took out your existing loan?
5. Build a list of at least 5 mortgage refinance lenders who specialize in cash-out mortgages:
Now, it is time to apply to multiple refinance lenders. Be sure to build a candidate list of at least 5 lenders before you go out and start applying. You will want to play them against each other in order to qualify for the best rate, given your credit score and the amount you want to borrow.
Consider these 5 tips as you find the best mortgage refinance loan that allows you to cash out some of your equity.
About the Author: Find the best low-rate mortgage refinancing lenders at:
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