Cash Out Loans

Cash out loans can be defined either as a refinance loan or a home equity loan, but in either case, people use them to take advantage of equity money in real estate property. These loans can be very useful when running into unexpected financial emergencies, financing a college education or adding an addition onto a home, remodeling or maybe buying a new car. In any of these cases and many more, cash out loans make these lending agreement possibilities a reality. So how do these types of loans work? "Therefore being justified by faith, we have peace with God through our Lord Jesus Christ." (Romans 5:1)

Mr. and Mrs. Jones are nearing retirement and would like to give to the grandchildren some money for college. They have very little savings but have a fairly substantial house worth about three hundred thousand dollars, of which they still owe one hundred thousand dollars. A number of loans would allow the Joneses the opportunity to refinance their house again for three hundred thousand dollars. In the case of this couple, the interest rates of present day are three points below the original mortgage rate making their monthly payment much lower. After the origination costs are figured in, the Joneses will be able to give each of the four grandchildren about forty five thousand dollars for college expenses. It can only be hoped that these young people appreciate the sacrifice made for them!

A second of cash out loans options for the Joneses is a home equity loan or line of credit. In this scenario, the Joneses get a loan for the amount of equity they have in the house and use it for whatever purpose desired. The downside to this plan is that the couple will have an extra payment each month in their budget and the interest rate for typical home equity cash out loans may be higher than a refinanced mortgage. On the other hand, interest payments made on a home equity loan may be tax deductible, offsetting to some degree the higher interest rate. But there may be a third option for this very family devoted couple and that could be an interest only loan combined with one of the available cash out loans.

For this scenario to work, the Joneses would have to secure a mortgage loan company that would refinance their three hundred thousand dollar house with an interest only loan. It would allow Mr. and Mrs. Jones to do two things. First it would provide them almost two hundred thousand dollars for their grandchildren's' education and then give them, for at least ten years, as much as a thirty percent lower mortgage payment than they had before their choice of the cash out loans' agreement was struck. Since there would be major tax implications for any of these options, much research and care would have to be devoted by this fictitious couple before any decision could be made. In the meantime the grandchildren wait anxiously with bated breath.

One of the issues from some people in regards to one of the optional cash out loans is the speed with which all of the paperwork can take place. A home equity loan may involve an appraisal of property that could take up to a month. In fact, mortgages are often eight to ten weeks in formulation and the same can often be said for home equity loans. A cash out refinance lending agreement in which a mortgage is refinanced to get equity out of the property can take place in just a couple of weeks in many cases. However there are other disadvantages of the cash out refinance. Whenever a mortgage is refinanced for any reason, closing costs are going to be encountered. Closing costs are usually described as points and each point is one percent of the full mortgage, so three points on a one hundred thousand dollar mortgage would be three thousand dollars of closing costs.

Cash out loans described as a home equity loan typically do not have closing costs. Instead, as mentioned above, a home equity loan is another monthly payment on top of one's mortgage. All of these questions about what to do with equity in a house come down to one issue: is what will be purchased with the money out lending agreement worth a very long term payment? A vacation, a wedding, a car, a boat or a questionable investment can all be very fleeting and transitory. The possibilities of paying on a wedding for thirty years right alongside a mortgage may be motivated by an overwhelming love for a child, but how will that help when retirement rolls around? A sport car may indulge the senses for the moment, but can the same be said seven years from now when the odometer shows forty thousand or a hundred thousand or more miles?

The Bible reminds its readers that there is pleasure in sin for a season. Anyone standing up and saying that sinners aren't having fun are fooling themselves! On the other hand, God declares that a season is all anyone gets when it comes to enjoying rebellion against Him and that there is a day of reckoning, not only at death, but in the next season of life when the chickens come home to roost. Just like cash out money that is used for temporary pleasure has a long term cost that might be excruciating later on, living like God doesn't exist will not only cost a person the joys of heaven, but sin filled living now will always come back to haunt a person even in this life. Don't be fooled by the down in the mouth, sour faced people that call themselves Christians. Real believers have not only great fun and laugh and enjoy life, but they possess a joy that is unexplainable and anyone can have this same experience when surrendering their lives to the lordship of Jesus Christ.

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