As the economy and home values gradually improve, so does borrower confidence in taking on more debt through cash-out refinances. What is the benefit of this transaction, and is it a good idea for you?
There are many reasons to refinance into a higher mortgage amount and get cash back: home improvement projects, paying for tuition, paying off student loan or credit card debt (often with higher interest than your mortgage), paying off a home-equity line of credit, travel costs - or you name it.
If you're looking to reduce other existing debt carrying higher interest rates or raise your home's worth, this can make a whole lot of financial sense. Additionally, with current mortgage rates as low as they are, you could still get a lower rate and payment than what you currently have and get cash out. That's a win-win refinance.
Of course, there are still inherent risks that comes with taking on more debt. Home values are never guaranteed to stay put and will almost certainly be different next year - for better or worse. Without a crystal ball, it's possible that your home's value could drop and you could get in over your head in debt.
If you have equity in more than 20 percent of your home's worth and need extra money to cover other expenses, though, getting a cash-out refinance could be a great (relatively low-risk) option. With the stock markets at all-time highs and the economic outlook bright, it's a great time to see if this makes sense for you.
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