Your options
With no mortgage on the home, you have the most equity possible to borrow against. The common paths are:
- Cash-out refinance: a new first mortgage that pays you cash. How much you can borrow depends on your home's value, your credit and the loan program; your loan consultant can tell you what applies.
- Home equity loan: a fixed-rate loan with a set payment. CapCenter's home equity loans are offered as second mortgages, so ask your loan consultant whether one fits a home with no existing mortgage.
- Home equity line of credit (HELOC): a revolving line from some lenders, usually with a variable rate. CapCenter offers fixed-rate loans, not HELOCs.
How a cash-out refinance works here
Because there's no loan to pay off, the full amount, minus any costs at closing, comes to you. For example, if a loan program allowed 80% of value, a $400,000 home could support a loan of up to $320,000. That's a general illustration, not a CapCenter limit or an offer. Your amount also depends on your credit, income and the home's value.
You choose a term and a rate type, and you'll have a monthly payment again. CapCenter refinances come with ZERO Closing Costs (restrictions apply). Prepaid interest and escrow deposits still apply.
If you bought with cash recently
Many lenders have a waiting period before you can take cash out of a home you just bought. Some loan programs offer delayed financing, which can let you borrow against a home bought with cash soon after the purchase, often up to what you paid. Rules are specific, so ask your loan consultant whether it applies to you.
Think it through first
A paid-off home is a real financial cushion. Adding a loan back means a monthly payment and the risk that comes with debt secured by your home. Cash-out tends to work best for things with lasting value.
- Repairs, renovations or a new roof.
- Paying off high-rate debt, with a plan to stay out of it.
- A down payment, education or another major goal.
- Borrow only what you need, and compare the payment with your budget.
Taxes and insurance
Loan proceeds generally aren't taxable income. Whether the interest is deductible depends on how you use the money; ask a tax advisor. With a new mortgage, your lender will require homeowners insurance, and you may have an escrow account for taxes and insurance again.
What you'll need
- Proof of income, like pay stubs, W-2s or tax returns.
- Bank and asset statements.
- Homeowners insurance details.
- Your deed or proof that the home is owned free and clear, if asked.
