Use your home's equity to take cash out
When would you want to take cash out?
Pay for home improvements.
If you are planning a renovation, refinancing your home with cash out is an option for funding your project. Whether you are looking to remodel your kitchen, upgrade your bathroom, or create a new outdoor living space, this one-time cash payment gives you cash on hand to improve your home.
You can use your refinance as an opportunity to consolidate debt. This may allow you to lower the amount you're paying on your total monthly bills, because the interest rate on your mortgage is probably going to be lower than the rate you're getting on your credit cards or the other types of bank loans.
Make a big purchase.
You may choose to use cash-out refinancing for nonrecurring expenses, like buying a car, paying for a wedding or financing an education—purchases that might otherwise require you to borrow funds at a higher interest rate.
Consider all your options.
If your home is an important part of your total net worth, make sure to consider all your options carefully before deciding to take cash out of your home’s equity. Consolidating debt and then taking on new consumer debt will increase your overall liabilities, while potentially giving you a false sense of financial security. If you are considering cash-out refinancing to pay educational expenses, you may also want to look into state and federal education loan programs.
Ready to refinance your mortgage?