According to Bankrate, around 34% of all refinances in 2015 were cash out refis. It’s clear that more and more consumers and investors alike are turning to them – so what are the reasons that you should get a cash out refinance loan?
Find the top three reasons to consider choosing this type of loan below. Reach out to Lionshare Lending today at 855.505.LEND if you’re an experienced investor in search of the perfect lending partner.
Renovate Your Property
The number one reason that you should get a cash out refinance loan is to renovate your property. This is true for real estate investors looking to improve the value of their assets, and it’s also true for a homeowner who may want to build an addition to their home.
It’s important to point out here that commercial cash out refinance loans are different from individual homeowner loans. While both rely on leveraging equity in your property, commercial cash out refis are designed to help investors improve their investment property or handle common expenses like upkeep and expansion. These are typically short-term loans with a lower loan-to-value (LTV). Lionshare is proud to offer some of the best terms in the industry, with an outstanding LTV of 70%.
Homeowner cash out refinance loans, on the other hand, are an alternative to home equity lines of credit (HELOCs) which may carry higher interest rates than cash out refis. They are a way for homeowners to turn equity into cash for home improvements and additions, or even pay for their children’s college tuitions.
Purchase New Property
Another reason to consider a cash out refinance loan is to purchase additional property. While this is largely limited to real estate investors, rather than anyone who owns a primary residence, it is a smart way to leverage your investment property and expand your real estate holdings.
If you own one piece of property, but find the perfect real estate investment opportunity, then it makes sense to use the equity in your existing property to purchase the new one. This type of investment is just one of the strategies available to property owners. In fact, you may be able to leverage your already existing equity to purchase a number of new properties.
Consider this – you own a piece of property free and clear worth $1 million. You get a cash out refi loan with an LTV of 70%, which gives you $700,000 of investment capital. You then use this capital to put $100,000 down on seven investment properties. Congratulations, you’ve turned one property into eight investments.
It’s important to stop for a moment to consider the risk that comes along with this type of investment. It is not for new real estate investors, and if you pull the trigger before doing your due diligence – this strategy can potentially lead to losses. This is just one reason you want a lending partner with decades of experience on your side – to guide you every step of the way.
Consolidate Your Debt
This reason to get a cash out refinance loan is mainly for homeowners. While investors can consolidate their debt with cash out refis, it’s much more common for homeowners to take this route. This is due to a number of reasons, largest of which is the length of the loan itself.
Investment loans are typically short, often between six months and three years. Traditional mortgages, on the other hand, are usually fifteen to thirty-year loans. Mortgages also carry lower interest rates than other types of debt (credit card, student loans, etc.) and the interest is typically tax deductible.
Both the length of the loan and the lower, tax-deductible interest make mortgages the perfect vehicle for homeowner cash out refi loans. This allows homeowners to consolidate debt, get a chunk of cash-in-hand to achieve their goals, and very possibly a lower interest rate. It’s a win-win-win.
Now that you know the top three reasons you should get a cash out refinance loan, it’s time for you to find the perfect lender. Our executive team has over four decades of experience. We know what it takes to find the perfect loan for your project. Call us now at 855.505.LEND to get started today.