Use your home's equity to take cash out
When would you want to take cash out?
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.
Achieve tax benefits.
Another reason to consider taking cash out on your refinance is that your mortgage interest may be tax-deductible, while your credit card interest is not.
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, non-tax-deductible 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 that also offer tax-deductible interest.
Ready to refinance your mortgage?