Is a Cash Out Refinance the Right Move For You? by Daria

In current economic times many people are looking for ways to get money and will consider a cash out refinance of their home loan. Refinancing and getting cash back can be an easy way to put money into your hand.

This kind of loan takes your current mortgage and rewrites it for a larger amount than you previously borrowed. It is as if you are re-buying your home for a larger sum of money. When the loan is complete, you get the extra cash. Home repairs, large tax debt, college payments, and debt reduction are the main reasons home owners refinance their mortgages.

Your first consideration is the amount of equity you have in your home. Equity is the difference between what your home is worth and what you owe on it, the greater the difference, the greater the equity. Most banks will cash out 80% of you available equity, although depending on how long you have owned your home, and your credit situation, some banks will go higher than that. If you have less that 20% available equity in your home you will have to pay PMI (Private Mortgage insurance). This is to protect the lender as these loans can be risky to them. If you can get by on an amount that doesn't put you over 80% of your available equity you can avoid this extra cost.

Once you decide to move forward with your refinance you will have to have an appraisal of your property. You will meet with a lender and go through all of the same steps you did when you bought your house. There will be points and fees that will come up. Most of these fees (and in some cases all of them) can be wrapped into your loan so you pay nothing out of pocket.

Another benefit of a refinance is that you can often times get a lower interest rate. When all is said and done you could end up with a better mortgage, a smaller payment, and cash in hand to get you on your feet financially. While tapping into your home's value can seem overwhelming or a bit scary, it is a much safer option than many other high interest loans that are out there. Borrowing against a credit card or automobile can come with high interest rates and monthly payments.

Cash out refinance is a safe way to put money in your pocket in these troubling times. By spreading out your loan over many years you get what you today at a monthly payment you will be able to make tomorrow. Your first step is to make a call to your lender or a reputable lending institution and see if this is an option that will work for you.

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