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Cash-Out Refinance Mortgage Loans

An overview about mortgage home cash out refinance interest rates

A cash-out refinance allows a borrower to use the equity in his or her term to get cash in hand upon refinancing a mortgage. So why would a person want to do such a thing?

Should I refinance?

As of this writing (November 2014), mortgage interest rates are low for all types of mortgages, including cash-out refinances, so there are circumstances in which mortgaging under a structure that gets you some ready cash can make sense.

Reasons for Considering a Cash-Out Refinance Mortgage

  • Home improvements
  • Vacations
  • Medical bills
  • Education expenses
  • Other investments like stocks or bonds
  • To pay off credit cards, auto loans, or other high-interest debt
  • To buy another property

Who can argue with wanting cash to pay off a credit card that carries a 20% interest rate, if you can pay around 4% on a mortgage? Of course there's the risk of losing your home if you get your cash-out refinance mortgage and then can't make your mortgage payments, but taking a bit of a risk to get out from under crippling debt does seem to make sense, especially if the borrower is confident of not ending up back in the same situation, and he's getting low mortgage refinance interest rates.

Borrowers may consider a cash-out refinance mortgage if they believe that they'll be able to invest the money at a rate of return that's better than their current mortgage rate. Or, perhaps they want cash to carry out home improvements that will significantly enhance the value of their home, thereby lowering their LTV (loan-to-value) ratio over time, and increase their home's equity.

In the final analysis, it really doesn't matter why you want a cash-out refinance mortgage. For the lender's purposes, all that matters is that the applicant meets the criteria for eligibility - lenders don't care why you want the money.

Does It Make Sense?

You need to ask yourself whether the circumstances make it a sound financial course of action to refinance your current mortgage in order for you to pay off other debt, fix up your house, consider other investments, etc. One thing that you should keep in mind is that there are going to be fees attached, even more so than if you were simply taking out a second mortgage without taking cash.

If you're in dire straits, a cash-out refinance mortgage can provide you with much-needed assistance. It does, however, re-set the mortgage clock, and you'll lose all the equity in your home that it's taken you so long to build. So, think carefully about what it is you want the money for and also consider mortgage refinance interest rates. Just our opinion, of course, but some of the reasons we've suggested for considering a cash-out refinance mortgage make more sense than others - if you're considering doing so for the sake of a vacation, well... let's just say we don't think that's such a great idea.

The Final Word, Is cash-out refinancing right for me?

Mortgage refinance interest rates are favorable right now, so if you're considering a cash-out refinance, it's a good time to do it. If your mortgage is almost paid off, you might be better off, though, to leave it alone, and instead, pull cash out by means of a second mortgage. If you still have a while left to go, and your interest rate isn't all that great, you might want to refinance the whole thing.

Keep in mind, too, that you could find yourself in a position of negative equity. So, when you're thinking about a cash-out refinance, you should do it only in instances when you really, desperately need the cash, or when the mortgage refinance interest rates are just too good for you to pass up. Think long and hard, and do your research in Orange County before you decide.

After all, it all depends on your monthly savings. Speak to one of our licensed agents in Orange County today to help you decide whether a cash-out refinance is right for you.