Cash-Out Refinance? Don't Forget the PMI
05/15/24
If you have significant equity in your home you may decide to refinance and take a portion of that equity as cash to make home improvements, a major purchase… whatever you decide. But keep in mind if you take too much cash you may be required to pay private mortgage insurance, or PMI − significantly increasing your monthly payments.
PMI is generally required on a home loan with a balance of eighty percent or more of the value of the home. Say you currently owe $100,000 on a $200,000 home; if you refinance, take cash out, and end up with a loan of $160,000 or more you will be required to pay PMI, increasing your monthly payment by approximately $100 (the PMI rate goes up as the amount of the loan goes up).
When you refinance, look at all potential cost repercussions − not just the cost of the loan itself.
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This article contains general information only. Sunflower Bank, N.A. is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.