Many homeowners are interested in a cash back mortgage refinance but do not fully understand what it is. A home is most likely the most expensive thing you will ever own so you should know the pros and cons of this type of refinancing. Here is a general breakdown of what a cash our refinance is and how it may help you.

Mortgage refinancing to get cash back is not available to everyone. You must usually have 20% equity in your home in order to qualify. However, some mortgage lenders and banks offer cash out refinancing options for homeowners with less equity than that. When you choose a cash out refinancing option it is not really that complicated to understand. You are just taking out a new, larger home loan and replacing your current one with it and pocketing the difference. You may also be able to do this and get a lower interest rate on your loan which would be another benefit and help offset expenses of refinancing a mortgage to get money from the homes equity.

For example, say you own a home that is worth $300,000 and you owe $100,000 over the next 10 years. Refinancing to get money may mean that you take out a new loan that is for $150,000, pay off the $100,000 you owe, and pocket the remaining $50,000. Hopefully you realize that cash back mortgage refinancing is a great way to get a large amount of money at a great interest rate, it all will be paid back over time. Never forget that you are still borrowing money against your home.

While the money you get from refinancing a mortgage this way can be used for anything you want, it is best to have a good plan for it. Use it to pay down other high interest debts, loans, hospital bills or other expenses and try to get ahead in your finances. Or, you could spend the money on home improvements and repairs which will increase the homes value even more. Ultimately, it is up to you what to do with the money, however make sure you have a good plan for it.

-M Petrone

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