Cash Out Refinancing
Refinancing is to pay off your existing mortgage with another
one at a lower rate.
A cash out refinance is refinancing your existing mortgage and
borrowing some of your equity in a lump sum to use for other
purposes. Such as home improvement, college tuition, family
vacation, etc.
Other reasons people use a cash out refinance is to use the
equity in their home to invest in real estate, or start their
own business.
Cash out refinances are very good tools when used for the right
reasons. It is not wise to do cash out refinancing if you are
going to receive a higher interest rate than what you already
have on your current mortgage.
If you have a really good rate on your current mortgage, it
would be wise to leave it alone.
However, if you are looking to tap into the equity you have
acquired in your home without touching your current mortgage,
you may want to consider a Home Equity Loan.
With a home equity loan you can borrow the equity you have
acquired without touching your first mortgage. The home equity
loan is also referred to as a second mortgage.
For instance, if you have acquired $50,000.00 worth of equity in
your home, you can borrow what you need of that equity, without
your first mortgage being affected.
The cash out refinance and the home equity loan are very similar
and serve almost the same purpose, your situation should
determine the right choice for you.
As always, I want to leave you with this reminder. Do your
homework, educate yourself, and shop around for the best deal.
Jennifer Hershey has more than twenty years of experience in the
Mortgage Industry as a loan officer. She is the owner of
http://www.explainingmortgages.com/, a mortgage resource site
devoted to making mortgage terms and products easy to
understand.