The recent surge in home prices has presented today’s homeowners with the opportunity to use the appreciated equity in their homes to purchase other real property. This means that you may have enough equity to do a cash-out refinance and put a down payment on a second home for your vacations and eventual retirement.
It is a great time to consider a cash-out refinance for another home purchase because you can take advantage of a trending buyer’s market. You will also be able to optimize rental income from a vacation or investment property while enjoying appreciation of value. A cash-out refinance may give you enough funds to meet the 20% down payment threshold that most lenders require on second home purchases.
With a cash-out refinance, not only do you just refinance the existing mortgage amount, but you also may be able to take cash out and finance up to 80% of your home’s value. The amount you can borrow will depend on what you qualify for in a new mortgage.
Since a cash-out refinance can give you additional down payment funds for a second home, you can benefit in several ways. Putting more money down on a second home can qualify you for a lower interest rate because it presents a lower risk to the lender. You will benefit from lower monthly payments with a higher down payment and realize more financial stability. A 20% or more down payment will also avoid you having private mortgage insurance. Using cash-out funds for a second home purchase can give you the advantage of generating some additional income if you rent it out when you are not using it.
Give me a call so we can see how your home’s equity can help you with the purchase of your second home.