What to Consider When Taking Cash Out of Your Existing Mortgage

Cash-out refinancing is the term used to describe the act of refinancing your mortgage and using the equity in the property to take out cash at the same time.  This can be a win-win-win situation for real estate investors, because it’s actually possible to refinance your mortgage, secure a lower interest rate, and walk away with extra cash in your pocket. However, there are some things to consider before going this route, and today we’re going to talk about what you need to think about before committing to a commercial loan refinance.  

Why People Opt for Cash-Out Refinancing

A cash-out refinance is a great option for some because it gives you access to money that would normally be tied up in real estate. One of the most common reasons people take cash out of their mortgage is to finance renovations, repairs, and other home or building improvement projects. However, there are also other reasons why people choose cash-out refinancing, including:

  • Debt consolidation

  • Consolidating multiple mortgages into one

  • Making other investments

  • Lowering monthly payments

  • Increasing cash-flow

Refinance When the Interest Rates Are Low

Refinancing a mortgage is a great option when the interest rates are low, especially if you currently have a high fixed rate or an adjustable rate right now. Because current interest rates are at all-time lows, you could refinance now and lock into a new mortgage that has a low fixed rate, saving yourself thousands of dollars in the long run. Moreover, once you’ve got the lower rate, you can either opt for lower monthly payments, or you can keep your payments the same and pay off the mortgage faster.

Have a Solid Repayment Plan in Place Before Committing

Taking out a loan is easy: it’s paying it back that can be hard. Indeed, one of the major drawbacks about cash-out refinancing is that you do actually have to pay the money back, and there's a great deal at stake if you don’t have a plan in place to do this. In fact, you’re putting your property on the line, and you could run the risk of losing it if you aren't able to repay what you take out. For this reason, it’s advisable to have a repayment plan figured out before you sign up for a commercial real estate loan refinance.

Be Aware of Potential Fees

There are pros and cons to any financial decision, including a cash-out refinance of your commercial mortgage. But as long as you take these issues into consideration and know the risks and possible rewards, then this can be a great option to refinance your mortgage, get a better interest rate, and get some cash for your business. If you’re looking to get started now apply today for your commercial refinance.