With the present market conditions, most homeowners treat their homes as piggy banks, readily transforming their equity to cash and using it to repay their credit card debts or for home renovation purposes. You either take out a home equity loan, more commonly known as a second mortgage loan or go for cash out remortgaging. This is a process that is very common in the US as well as the UK and while it is known as cash-out refinancing in the US, it is called cash-out remortgaging in the UK, but the concept is the same. If you want to know more about this process, read on the concerns of this article.
What is cash-out remortgage?
When a homeowner struggles to make payments towards his credit card bills or is going through a credit crunch and needs immediate cash, they go for cash-out remortgage as this is the best option for the cash-strapped but house-rich people. You can remortgage your home loan for an amount that is much more than what you actually owe on the existing mortgage loan. The homeowners are allowed to repay the extra amount and the existing loan balance over a long period of time. He will also be given a check of the additional amount so that he may utilize the proceeds in any way possible depending on his needs.
When is it possible to go for cash-out remortgaging?
A cash-out remortgage is only available to those homeowners who have accumulated enough equity in their home. This is an important criterion as the lender can then easily justify the practice of providing funds to the homeowner since he has accrued enough equity in his home. He will also feel that there will be a lesser risk as the home is pledged as collateral while getting the loan. Not all lenders offer this option of remortgaging at an amount that is much more than what he actually owes on his home loan. And so the borrower has to intimate the lender about his urge to cash-out remortgage his loan.
How can you use the cash that you get from remortgaging the loan?
When you go for cash-out remortgaging, you can get access to immediate cash and there are no restrictions about how you may use this money. You don’t even have to offer any kind of explanation to the lender mentioning the way in which he will use the funds. You can use it to repay your credit card debts, to repay the pending tuition costs, for renovating your home or for repairing your car.
Therefore, if you’re a struggling debtor, go for cash-out remortgaging and use the cash wisely in making ends meet. Repay the home loan on time too to avert the risk of losing your homeownership rights.