For many homeowners, a “cash-in refinance” could be an excellent financial move. In the last decade, an abundance of homeowners have opted for “cash-out refinancing” to take advantage of rising home prices and use their home equity as they see fit.
With today’s interest rates on both home mortgage loans and savings accounts, a cash-in refinance might be a strategic move for a homeowner to eliminate Private Mortgage Insurance (PMI) to pay off a higher interest rate second mortgage or simply lower their mortgage payment.
The idea of a “cash-in refinance” is when a homeowner will bring money to the closing in order to lower their loan-to-value ratio. The homeowner will then have a lower interest rate and lower, or zero PMI.
Take the time to figure out if this idea may be right for you, and we can talk over your options and financial goals. This idea will work well if:
- You are a homeowner with a mortgage interest rate over 5.5%
- You are paying PMI
- You have a second mortgage
- You have some savings sitting around only earning 1% or less
If you are planning to move in the next few years, it might be best to keep your money liquid. I can show you a total cost analysis to help determine how long it would take you to recoup the closing costs associated with this kind of refinance. If you don’t have 3-6 months of living expenses available, begin with building that up. You don’t want to save money on a mortgage and then lose it in an emergency, so having savings is key.
I am happy to discuss this idea with you to see if you are better off taking out money from your refinance to pay down debt or put toward a financial goal, or taking that money and putting it toward your loan. Let’s talk soon!