I’m in a tough spot and need some advice. We’re considering a cash-back refinance on our home to pay off debts, which include car loans and IRS debt. We owe about $185,000 on our home in Missouri, purchased for $217,500 in 2020. With a current interest rate of 2.85%, our mortgage payment is $1,550. Zillow’s estimate says our home is worth around $306,200. If we refinance to access about $60,000 for debts, it looks like our payment could jump to about $2,100 with the current rates around 7.5%. Does this sound right? What are the pros and cons we should consider? Thanks for any help!
Honestly, I’d suggest getting a second job and paying down your other debts before refinancing from 2.85% to 7%. You’re making a bad financial situation worse.
The term you’re looking for is ‘cash out refinance.’ You might be able to access ~$60k, but many lenders only allow up to 75% LTV for cash-outs. So, you might get less than that. Plus, you’d be refinancing that $185k at a much higher rate. You’d be paying a lot more in interest overall.
Does a good credit score help? Mine’s around 800 and my partner’s is 775.
Having a good credit score helps you qualify for loans and get better terms, but that doesn’t mean you should borrow more. You need to assess all your debts and their interest rates. Refinancing should really be a last resort since the higher rate can be a long-term financial burden.
Zestimates aren’t reliable; they’re just for entertainment. You won’t borrow your way out of a borrowing problem. You could end up with more debt and faster than you think.