If you are willing to give up some of your equity in exchange for cash, your house could be a big source of cash. Refinancing your mortgage to get cash out is one way to get this money.
What does cash-out refinancing of a mortgage mean?
Cash-out refinancing is when you refinance your mortgage for more than what you owe and take the difference in cash. If you've been paying down your mortgage for a while, the amount you owe on the principal is likely to be a lot less than when you first got the loan. When you have enough equity, you can get a loan that pays off what you owe and gives you extra money.
Say you owe $90,000 on a $180,000 house and want to add a family room that will cost $30,000. You could refinance your mortgage for $120,000, and the bank would then give you a check for the difference of $30,000.
You can use the difference to make home improvements, buy a second home, pay for school, pay off debt, or do anything else that requires a lot of cash. Also, you might be able to get a better interest rate on your mortgage if you refinance it.
But if the interest rate for your refinanced mortgage is higher than what you're paying now, this probably isn't the best choice. It might be better to get a home equity loan or line of credit (HELOC).
Most of the time, a homeowner can refinance up to 100% of the value of their home. But if you borrow more than 80% of the value of your home, you may have to pay private mortgage insurance or a higher rate of interest.
Go to http://www.lendingtree.com/cec/yourhome/yourmortgage/cash-out-mortgage-refinancing.asp to find out more about cash-out refinancing.
