Cash-Out
Lower Interest Rate
Have interest rates fallen? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?
The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms.
Refinancing - Is it Worth It?
The refinancing of an existing mortgage for the purpose of changing the interest and/or term of a mortgage without advancing new money on the loan. This differs from a cash-out refinance, in which new money is advanced on the loan. Rate and term refinances can carry lower interest rates than cash-out refinances.
Cash out refinancing (in the case of real property) occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses.
Debt Consolidation
Shorter Term
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Debt consolidation can be a very convenient way to save money. When you consolidate your debts, you take out one loan for the purpose of paying off your other loans - which is more convenient and may lower your interest rate.
Instead of directly refinancing your home equity loan, you can opt for a shorter term instead. By choosing a shorter term loan, you may be able to save more money in the long run thanks to the shorter term reducing your total interest.
