Are you looking for a way to finance your upgrade for your home in Berks County? One way that homeowners can get extra cash for remodeling or other important purchases is through cash-out refinancing. This is a type of home loan that replaces your current loan with a new one for more than what you owe on your home in Berks County. That means you can use the extra cash to remodel your home or for whatever you need it for. Would a cash-out refinance be a good choice for you?

Here’s how a cash-out refinance works:

  • Pays you the difference between the mortgage balance and the home’s value.
  • Has slightly higher interest rates due to a higher loan amount.
  • Limits cash-out amounts to 80% to 90% of your home’s equity.

Keep in mind that you have to have a certain amount of equity in your home. That means that the value of your home has to be higher than what you owe on it. Plus, you can't pull out 100% of your home's equity with this type of loan.

For example, if your home is valued at $200,000 and your mortgage balance is $100,000, you have $100,000 of equity in your home. You can refinance your $100,000 loan balance for $150,000, and receive $50,000 in cash at closing.

What are the pros and cons of a cash-out refinance?


  • Lower interest rates: Typically, a mortgage refinance will have a lower interest rate than a home equity loan.
  • Debt consolidation: You can pay off those higher interest credit cards and save money.
  • Higher credit score: Paying off credit cards will help your credit score.
  • Tax deductions: If you use the money for home improvements, you may quality for the mortgage interest deduction.


  • Foreclosure risk: Since your home is collateral, you could lose your home if you can’t make the payments.
  • New terms: The terms of this new loan will be different from the original loan.
  • Closing costs: This is just like any other home refinancing, so you will have closing costs of around 2% to 5% of the mortgage. Make sure you weigh your potential savings with the costs to make sure its worth it.
  • Private mortgage insurance: If you borrow more than 80% of your home’s value, you’ll have to pay for private mortgage insurance. For example, if your home is valued at $200,000 and you refinance for more than $160,000, you’ll probably have to pay PMI. Private mortgage insurance typically costs from 0.55% to 2.25% of your loan amount each year. PMI of 1% on a $180,000 mortgage would cost $1,800 per year.

If you plan to use the funds from a cash-out loan for making improvements on your home, or in other ways that add equity to your home, then this is the right type of loan for you. But if you plan to use the funds on a new car or a vacation, it would not be a good idea, as these are purchases that offer no return on your investment. In the end, be smart about your refinancing decisions, and you’ll have a better chance of success.

Visit our blog every week for more real estate articles and ways to buy a home in Berks County. We can also help you find the perfect home for sale in Reading and the surrounding communities of Blandon, Boyertown, Douglassville, Exeter Township, Fleetwood, Kutztown, and Oley with our powerful property search tool.