Your home can be an excellent source of available capital. Whether you’re looking to consolidate bills, pay for a child’s education, or reinvest your home’s equity into other areas, a cash-out refinance can help you accomplish these goals.
Here are several tips to help you get the most for your hard-earned equity through cash out mortgage refinancing:
1. Taking cash back
If you’ve had your existing mortgage for a while, the principle balance is now probably lower than it was when you purchased your home. Provided your home’s value hasn’t dropped significantly due to the current economy, the equity you’ve built up lets you refinance and take cash back at closing.
2. Since it’s your money, you can use the cash for anything.
From home improvement to purchasing a second home, paying college tuition, or consolidating higher interest debt like credit cards; refinancing is a smart way to convert your home’s equity into money that can help you get out of debt or accomplish other financial goals.
3. Refinancing your mortgage may be a good idea when current mortgage rates are lower than your existing home loan.
If you need cash, you may be able to justify the higher monthly payment. Keep in mind that cash out mortgage refinancing is not without risks; you are giving up a portion of your home’s equity, so you should consider property value trends in your area as you’re making this decision.