Cash Out Refinance

There are many good reasons to refinance your current mortgage, or get a second mortgage and pull equity out of your home. Here are just a few.

1. Structural additions or improvements to your home.
2. Obtaining funds for investment.
3. College tuition for your children.
4. Paying off other debt, such as credit cards, in order to reduce your total monthly outlay.

Improving your home can increase its value. Investing wisely can help create a larger net worth. Both could pay off in retirement benefits for you.

Arguably, item four can help create wealth by lowering your monthly outlay, but this item lends itself to a different discussion. In recent years, many have experienced the best of both worlds regarding consuming and borrowing. People have been able to refinance a high-interest loan, consolidate credit card debt into a new, low-interest loan, and end up with a larger mortgage with a lower monthly outgo. Don't count on these economic conditions being available when you want to borrow against your home.

It's easy to think of numerous reasons to borrow and spend. We're inundated daily with messages to consume--and most of us are pretty good at it. Certainly there are times when borrowing can't be avoided, such as when buying a home. Be very careful when you think of your home as a source of funds for consumption, however. If you find it hard to get rid of your credit card debt and think borrowing against your home is a good idea--think again. You might be better off calling a credit counselor for budgeting assistance, instead of calling a bank for a new first or second mortgage. Credit card debt won't cost you your home if you don't pay it back. A mortgage will cost you your home if you don't pay it back.

Pulling equity out of your home can provide important benefits. Be careful. Don't risk the security of your home on frivolous spending.