How to Control Your Financial Destiny with a Cash-Out Refi
Gaining control over your financial destiny is no easy task. Especially in the current climate, financial stability and comfort can seem like a constant uphill battle. You don’t have to be Sisyphus, constantly rolling a boulder up a hill that’s always destined to fall back down. You can gain financial control through a variety of means, one of the main ones being a cash-out refinance. Here at Lending Studios, we’re dedicated to helping you explore your options and the benefits of each strategy you might implement to gain a better footing in terms of financial wellbeing.
If you’re looking for a way to secure your financial future, then we’re here to show you how you can take the reins. After all, if you can effectively utilize your largest investment asset, your home, then you should be able to provide yourself with future peace of mind.
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The Idea Behind a Cash-Out Refi
For most folks, the largest segment of your wealth is currently tied up in your house. If you’ve built equity in your home, that’s even more true for you. Taking advantage of that equity might seem counterproductive, however in a volatile economy like the one we’re currently coping with, it could be your best option. The fact of the matter is businesses are being forced to close their doors for long periods of time and severely limit the amount of revenue they can make. And when government relief is slow and/or insufficient, more folks struggle to stay afloat with their finances. That means people have to get creative, they have to use the resources that are at their disposal in order to take control of their finances today and tomorrow. For some, that could mean an opportunity lies within the equity of your home that could relieve current day financial stress and give you the option to reinvigorate your future plans. At the very least, you’ll be able to face unforeseen circumstances with a proactive approach. You could use the money to bolster your emergency savings, contribute to your dwindling retirement, or keep your kids in college for the next couple of semesters.
The key to a successful cash-out refinance is all in the strategy. So, let’s explore that strategy together.
How to Use a Cash-Out Refinance To Bolster Your Finances
Prepare For the Unexpected
Keep Your Retirement Above Water
Keep Your Kids In School
Make More Powerful Investments
Pay Off Your Debt
Prepare For the Unexpected
Unforeseen circumstances have a nasty habit of getting in the way of your goals. The best thing you can do to combat that is prepare for them to the best of your ability. The entire year of 2020 has been a testament to how effective those strategies can be when you need to protect your nest egg. Accidents happen, sometimes the economy crashes and sometimes you just need to fix a flat tire. Living paycheck-to-paycheck just can’t cut it in the long term. A cash-out refinance, if used effectively, could bridge the gap between that flawed model of living and creating a real cushion for you and your family.
The unexpected can put a considerable strain on your financial wellness, so start building up a cushion. If you don’t have the means to put away that capital from your monthly paychecks, you could consider a cash-out refinance. While that money is just sitting in equity, it could be sitting in your savings account giving you peace of mind. Knowing you have some cash set aside will help you sleep at night if you think there's a chance you'll temporarily lose your income stream. By choosing a cash-out refinance now in order to bolster your savings, you could access a lower interest rate and end up paying less in interest over the duration of your loan. You’ll be able to create a new budget and still have enough left over to feel secure should you find yourself unable to pay certain bills out of the incoming cash you have.
Keep Your Retirement Above Water
Retirement is a regular and constant concern for many individuals. With the Social Security bucket looking to dry up by around 2037, that won’t leave many folks with a meaningful way to secure an income during their retirement years. In lieu of any real retirement support options, people are working later and later. If you feel pretty comfortable in the case of your current savings, you could potentially use the equity in your home to give you a more firm footing in your retirement savings account. Around 27% of average working age employees currently aren’t saving for retirement at all; if you’re one of those 27%, you might consider jump starting your retirement now with a cash-out refinance.
This is an especially good idea if you’ve started saving for retirement later in life. The fact of the matter is that the IRS only allows you to contribute $19,000 a year to your 401k. If you’re over 50, you can start putting in more to make catch up payments, however, the closer you get to retirement age, the harder it will be to put away meaningful amounts. With a cash-out refinance, you could repurpose the large sum of money acting as equity in your house and put it toward the future. It could act as the jump start you need to really start saving for your retirement in a meaningful way. At the very least, it’ll allow you to max out this year's retirement savings and allow you to focus on other forms of retirement saving or investing with the money you’d usually place toward your savings goals.
This could be especially helpful if you’re working on a tight budget. Your retirement fund is an investment portfolio and depending on your age and the funds you invest that money in, you could see a considerable return. However, the more money you have available in your retirement fund to invest, the more return you’ll see. If you’re struggling to put something away, a large sum of money directly into the fund could help you start seeing returns sooner, rather than later.
With a properly used cash-out refinance, retirement might not have to be a far off and unrealistic dream. It could be a reality that you can start working towards today.
Keep Your Kids In School
There’s no doubt about it, these days, college is expensive. In fact, it’s likely to be one of the highest expenses a person pays, whether that’s the person going to college or the parent paying for it. With many state schools crawling up to the $100,000 for a four-year degree mark, it’s getting harder for parents to be able to support that dream and college kids to be able to afford it themselves. If you find yourself struggling to help your child pay their college tuition and living expenses while they’re away, you could avoid telling them to take out student loans of their own with a cash-out refinance.
College loans are one of the more aggressive loans you could take out. They’re likely to follow a person for their entire life. If you could protect your child from lifelong debt with a well-placed cash-out refinance strategy, why wouldn’t you?
Boost a college fund you need now or 12 years down the road by using the large amount of capital that’s currently locked up as equity. Secure a lower interest rate and give your child an education without the life-long debt.
Make More Powerful Investments
Whether you’re looking to break into stock market investments or real estate investments beyond your current home, a cash-out refinance could be one of the most efficient ways of accessing the capital you need in order to make that first move toward greater financial stability through investments and passive income. If you’re looking to free up some cash to start making meaningful investments for your future, a cash-out refinance could be the best way to access that capital and start investing in order to earn more of that money, rather than letting it sit.
Pay Off Your Debt
Debt can be a major factor in most people’s financial health. How much of your paycheck every month is dedicated to debt? And worse, the interest associated with that debt directly impacts how much money you can make work for you. A cash-out refinance can often give you the option to consolidate that debt into one spot for a much lower interest rate. If you were to access a cash-out refinance, and use the cash to pay off all of your debt, you would essentially be consolidating that debt in one place.
Since mortgage rates at the moment are at a historical low, you would be paying the same sum off for the debt but you’d be paying a much lower interest rate, especially if the debt you’re consolidating is mostly credit card debt, which usually has interest rates that are three to four times the average mortgage interest rate. With less debt to worry about and only one bill to pay, you’ll be able to budget better, save more money each month, and increase your quality of life.
Explore Cash-Out Refinance Options with Lending Studios
Pursuing a cash-out refinance could alleviate a significant amount of financial stress when used properly. If you’re looking to implement one of the above mentioned strategies or if you have one of your own in mind, please feel free to reach out to Lending Studios. We’re excited to talk through your options with you and find the best possible tactics involving a refinance on your home. Schedule an initial consultation today to get started on your financial health improvement journey.
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