All the ways to reinvest your cash-out refi that you probably haven't considered
Posted by Jenni
Fri 20 November 2020
Like that Costco card you share with three of your friends, real estate is the gift that keeps on giving. Not only can your home appreciate in value over time and be a source of some seriously beneficial rental income — you've also got the option of refinancing. And a refi means the option to save money with a lower rate, or cash out a chunk of it to do some pretty cool stuff with.
So, if you’ve crunched the numbers and can comfortably dip into your equity — and have a good safety net that’s got your back — there are lots of ways to work a refi to your benefit. You could even do this more than once with the same home. Now here’s the fun part. Let’s look at some ways you could ride that sweet refi wave to living your best life.
Make a molehill out of a mountain
We all know how easy it is to rack up credit card debt — an unexpected repair here, a few too many ‘necessary’ laser-shooting drones there. And, it’s easy to feel like you’re getting robbed every month with those crazy interest fees.
One way to lighten your load and hightail it out of high-interest-ville (Population: Too many) — is to use a cash-out refi to consolidate and pay off your high-interest debts. With a much lower rate for the cash-out, you can pay so. much. less. in monthly interest — and get out of debt a hell of a lot quicker.
Would you rather pay $100 for a restaurant meal now or put it on a card and pay $300 later? If you’d rather pay off your credit card debt now instead of slogging away paying three times as much later, then debt consolidation may be the way to go.
Did someone say makeover?
Remember when you drooled all over your pancakes while watching that beautiful marble kitchen counter install on Flip or Flop? Or, that sick farmhouse bathroom remodel on Masters of Flip? Well, covet thy on-TV, sort-of neighbor no more.
With a cash-out refi, you could go 100% solar, replace that old roof, upgrade your floors, or do a lot of other things to increase the quality, beauty, and value of your home. And if you really just want that hot tub with a built-in karaoke machine (don’t we all?), then this is your chance.
You can even do some magic and make that cash-out loan virtually disappear. With the right combo of lower refi rates and increasing your homes’ value through improvements, you can refinance without adding to mortgage debt — or even while shrinking it. We guess in this case, more is less.
Back to school
If you’ve been daydreaming about being one of your company VPs, with a swanky corner office, or changing careers to something more lucrative or fulfilling, then a cash-out refi could open a whole new world of opportunity for you.
The right degrees and certifications can help fast track your way to the dream job, a higher paycheck, and more interesting work. We all know education isn’t cheap these days. So investing a chunk of change from refi in educational opportunities could open new doors for you, and pay for itself several times over. But think this option over really carefully.
Before taking the plunge, think about whether your earning potential will be enough to let you repay the cashout fast — so you can enjoy your new career debt-free
Play real-life Monopoly…
But, not in a lose-all-your-money-and-end-up-in-jail kinda way. We mean in a have-a-bajillion properties — and always pass GO — kinda way. As Confucius said, “The journey of a bajillion income properties begins with one single rental home.” Or something like that.
So, it’s definitely worth considering using a refi cash-out to build up your real estate portfolio. Buuuut, if you have debt or big expenses on the horizon, you should probably hold off for a little while.
It’s generally recommended that most people pay their debts down first — though some may want to buy property if the return is greater than their debt. It’s important to use caution when estimating the true costs and returns of owning a rental property — to make sure you’re really in a good place to buy another home.
And last, but definitely not least
Before you go signing up for that Arts degree or knocking down your living room wall, it's a good idea to meet with a financial planner and get a really clear picture of your finances, to make sure you can afford your new home loan — even if that career as a pet therapist doesn't pan out.
Before making such a big move, make sure you’re only reinvesting equity into something that’s not too risky for you. And make sure you have enough income and savings, in case things don’t go so smoothly. As Confucius also (maybe) said, “Cover your ass(ets).”
Keen on seeing whether you can tap into that home equity and save on monthly repayments with a low rate? You can get a good idea just by clicking the link below.