How To Use Cash Out Refi For Home Improvements in El Paso County, CO

Even if you're home is in good condition, you may still find that you need to do some significant upgrades.  This can be because you have adult children still living at home or perhaps you need to make better use of the living space without expanding. With the rising costs of labor and materials, the question many El Paso County homeowners have is, "how can I afford this necessary home improvement project?"

One way of financing you can look at is a cash-out refinance in Colorado. Let’s see how this works so you can use it for your upcoming home remodel.

How does a cash-out refinance work?

When you pay for your mortgage, you build equity on the home. A cash-out refinance involves tapping into your existing home equity to get a lump sum that you can use to fund things like a home improvement project. 

A cash-out refinance is a new, larger loan that replaces the existing mortgage. The difference between the two loans is paid to you as a lump sum and used for funding renovations or improvements. This type of loan is the most popular home improvement loan in Colorado.

Take note that you’ll only be able to take out around 80% of the equity amount since you need to leave some to have equity on the new loan.

If you want to learn more about a cash-out refi, also known as a home improvement loan, reach out to us today.

What are the steps to getting a cash-out refinance for home improvements?

If you think a cash-out refinance is the best option for your home improvement project, here are the steps you need to take to obtain one.

  1. Pick your loan amount

Before you apply for a cash-out refi, you’ll have to determine how much money you’ll need for your renovation. Ask contractors for an estimate so you can put down the loan amount on your application.

Aside from your loan amount, it would also be helpful to know the right loan term for your situation. Ask our loan officers for guidance as they will draw up several scenarios to help you compare your options. 

  1. Comply with the lender's requirements

Lenders can vary somewhat in their criteria, particularly regarding minimum credit scores. Most lenders will look for a credit score of 620 and above and a DTI ratio of less than 50%. Factors like when your last refi was and income also come into play. 

  1. Submit your loan application

Once you’ve determined your loan amount and have all the requirements needed, you can now submit your application for underwriting. Be ready to submit additional documents like bank statements, and pay stubs when required.

Need assistance with the process? Castle Rock Mortgage can help. Our loan officers would be happy to lend a hand, from preparing your requirements to closing your loan.

Are you ready to start your home improvement project?

Don’t let the lack of cash reserves stop you from finishing that long overdue home renovation plan. A cash-out refinance is a good option, especially if you have saved up enough equity on your home.

Pre-qualify for a Colorado home loan and take your first step to funding your home improvement project.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.