Cash-out refinancing provides borrowers with a lump sum after closing.
This cash can then be used in any way the borrower chooses — including home improvements.
If you need funds to pay for renovations, but have no idea where or how to access those funds, a cash-out loan may be an option for you.
Let’s dig into what a cash-out loan is, how it works, and the four reasons you should use this type of loan to pay for home improvement.
How do you renovate a house with no money?
Home improvement projects have numerous benefits.
Not only are you improving the home for your own enjoyment, but many renovations add value to your home.
These types of projects, however, can be costly.
Whether you’re looking to repaint every room, renovate the kitchen, or make additions to the home—costs will add up quickly.
Generally, people who want to make home improvements can use anything from cash they’ve saved up to credit cards or personal loans.
But what if you don’t have the cash, credit cards aren’t enough, and you don’t qualify for a personal loan?
Many homeowners have the option to use a cash-out loan to complete home improvement projects.
What is a cash-out refinance loan?
When a borrower refinances a loan, they are essentially revising and replacing the terms of their original agreement.
The most common type of refinance is rate-and-term, where a current mortgage loan is paid and replaced with a new agreement that includes a lower interest rate or more favorable terms.
Another common type is known as a cash-out refinance, which occurs when a home has increased in value over time.
With a cash-out, a borrower is able to get a new loan that exceeds the original loan amount. The difference between the two loans is then paid to the borrower in cash.
A cash-out loan can be the best, most cost-effective way for many types of borrowers to access the equity locked up in their homes and use it for a range of purposes, including home improvements.
What’s your loan scenario?
How much money can I get from a cash-out refinance?
The amount of cash you will get from a cash-out refinance depends on the amount of equity you have in your home and your mortgage lender’s terms.
The loan officer will determine how much you can receive, and this is usually based on a property’s loan-to-value (LTV) ratio.
Traditional lenders such as banks generally have more strict lending standards, and will heavily scrutinize a borrower’s credit and debt level.
Hard money lenders offer borrowers more flexible lending options, and allow cash-outs based on the overall merits of a deal.
A common cash-out example is as follows: Your home is worth $300,000, and you currently still owe $100,000. This means you have $200,000 in home equity.
Depending on the loan underwriting, you could potentially be approved for a portion of the home’s value, the full amount, or over the amount.
Don’t forget to also factor in closing costs.
If you know the exact amount you need to cover home improvement costs, it can be helpful to borrow only as much as you need, and keep the rest in your home.
Four reasons to use a cash-out refinance hard money loan for home improvements
Cash-out loans offer numerous benefits for borrowers with home equity.
Here are four reasons you should use a hard money cash-out refinance loan to pay for home improvements.
1. You end up with only one loan
Unlike a home equity loan or personal loan, when you get a cash-out refinance loan you are replacing your existing loan with a new one, meaning only one monthly payment.
This can make for a simpler process with only one mortgage to repay instead of keeping track of a second mortgage.
2. Ability to borrow a significant amount of money
Depending on the amount of equity locked up in your property, and the value of your property, you could end up with a significant amount of cash.
This allows you to cover all your renovation expenses, with potentially some extra left over to pay down debts or for other investments.
3. More flexible lending options
Hard money lenders simplify the lending process, and don’t have strict documentation requirements like banks.
Marquee funding group can do cash out refinance loans in 1st, 2nd, 3rd, or even 4th position.
They also provide funds much quicker than traditional lenders — in days rather than weeks or months.
This allows borrowers to move forward with timely projects much faster.
4. No limits to what you can do with the cash-out funds
When you cash-out refinance, the funds are yours to do with as you please.
There are no limitations on what you can use them for, in regards to home improvements or any other purpose.
Is cash-out refinancing right for you? Talk to a hard money lender
Do you think a cash-out loan might work for your unique situation?
Submit your loan scenario to the hard money lending experts at Marquee Funding Group.
Our team is equipped to structure even the most complicated loan scenarios.
Cash-out loans aren’t just for a typical homeowner, either. They can be used by real estate investors, for fix-and-flip projects, and a range of other unique scenarios.
Speak with our team to determine whether your deal makes sense, and we will quickly provide you with an answer.
Marquee Funding Group also offers:
- Loan amounts from $50,000 to $20 million
- LTV up to 70% (deal specific)
- Purchase money, rate-and-term refinance, and cash-out refinance
- Single-family, multi-family, commercial, industrial, and land loans
- Owner-occupied and non-owner-occupied consumer or business purpose
- Construction, ground up, fix-and-flip, or fix-and-occupy loans
We look forward to helping you complete your home improvement goals with our fast, flexible lending options.