When you’re ready to move on from your current home, you have several options for how to access the equity you’ve built up. Two popular choices are cash-out refinancing and selling the property outright, but there are also 401k loans to consider. Here are some things to keep in mind as you decide which route is best for you.
Cash-out Refinance vs. Selling Property Outright vs. 401k Loan
If you’re trying to decide whether to get a cash-out refinance, sell your property outright, or take out a loan from your 401k, there are a few things to consider. Here’s a look at some of the pros and cons of each option.
A cash-out refinance allows you to take out a new mortgage for more than you owe on your current home and keep the difference in cash. This can be a good option if you have a lot of equity in your home and you need the cash for a large purchase or to consolidate debt.
The downside of a cash-out refinance is that you’ll have to pay closing costs and you may end up with a higher interest rate than you have on your current mortgage. You’ll also be starting over with a 30-year mortgage, which means you’ll have a longer time to pay off your debt.
Selling Property Outright
Selling your property outright is another way to access the equity you’ve built up. This can be a good option if you need a large amount of cash quickly and you’re not concerned about having to move.
The downside of selling your property outright is that you may not get as much for it as you would if you refinanced or took out a loan. You’ll also have to pay real estate commissions, which can eat into your profits.
Taking out a loan from your 401k is another option to consider. This can be a good option if you need a large amount of cash and you don’t want to pay interest or fees. The downside of a 401k loan is that you’ll have to pay the loan back with interest, and if you leave your job, you may have to repay the loan immediately.
No matter which option you choose, make sure you consider all of your options and figure out what’s best for your situation.