Should You Sell Your Home Outright or Get a Cash-Out Refinance?
When you’re ready to sell your home, you have a few options for how to get the most money out of the sale. You can sell outright, get a cash-out refinance, or take out a loan from your 401k. Each option has pros and cons, so it’s important to consider your unique circumstances before making a decision.
If you sell your home outright, you’ll get the full value of the sale minus any selling costs. This is the simplest way to sell your home, but it may not be the most profitable. Selling costs can include real estate agent commissions, closing costs, and repairs or staging that you need to do to get top dollar for your home.
Another downside of selling outright is that you’ll need to find somewhere else to live. If you don’t have another home lined up, you may end up renting temporarily while you search for a new place to buy. This can be a hassle and an added expense.
A cash-out refinance allows you to take equity out of your home while still living there. You’ll get a new mortgage with a higher loan amount than what you currently owe, and you can use the difference to pay off debt, make home improvements, or invest in another property.
The biggest benefit of a cash-out refinance is that it allows you to keep living in your home while still tapping into your equity. This can be a good option if you want to make some home improvements but don’t have the cash on hand to pay for them outright. It can also be a good way to consolidate debt or free up cash for other investments.
However, there are some downsides to consider with a cash-out refinance. First, you’ll have to qualify for the new loan based on your income, debts, and credit score. This can be difficult if your financial situation has changed since you first got your mortgage. Additionally, you’ll have to pay closing costs on the new loan, which can add up to thousands of dollars. Finally, if you don’t make your payments on the new loan, you could lose your home to foreclosure.
Another option for tapping into your home equity is to take out a loan from your 401k account. This can be a good option if you have a 401k with a good balance and you don’t want to cash it out completely. However, there are some drawbacks to consider before taking out a 401k loan.
First, you’ll have to pay interest on the loan, which reduces the overall amount of money that you’ll have available for retirement. Additionally, if you leave your job for any reason, you’ll typically have to repay the loan within 60 days or it will be considered a withdrawal and taxed accordingly. Finally, if you can’t repay the loan, the outstanding balance will be considered a withdrawal and taxed as income.
Deciding whether to sell outright, get a cash-out refinance, or take out a loan from your 401k is a personal decision that depends on your unique circumstances. Consider all of your options and speak with a financial advisor before making a decision.