In basic terms, it is when you take out a new mortgage with a larger principal than your current mortgage. Often, the goal of a cash-out refinancing is to get a lower interest rate and to turn your home equity into cash that you can use for various purposes.

 

 

What is a “Cash-Out” Refinancing of a Home Mortgage?

 

For example, you may want to use that cash for the improvement and maintenance of your home. The benefit of this approach is that it maintains the value of your home or, in a best case scenario, actually increases that value.

 

Cash from this sort of refinancing can also be used for debt consolidation. This can be a smart move because mortgages, in general, carry a much lower interest rates than credit cards.

 

In effect, you are replacing expensive, immediate high-interest debt with less expensive, low-interest long-term debt. Even better, the interest on your new mortgage may be tax-deductible (unlike credit card interest).

 

Our recommendation: Once you have paid off those credit cards, get rid of them! Cut them up and throw them away so you wont have the temptation to fall back into debt.

 

Yet another use of cash-out refinancing is when you need a large amount of cash for, say, college tuition, large medical bills, and the like. Again, you get the benefit of lower interest rates and tax deduct-ability over other types of loans and/or credit cards.

 

One final point: You should consider a home equity loan or line of credit instead of a cash-out refinancing when current interest rates are higher than your existing mortgage or if you do not plan to be in your home for much longer.

 

So if you are looking to Cash-out Refinance Please Call me 909-920-3500. Or check my Videos on Refinancing.