It depends on the interest rate on your current mortgage, how long you plan on being in your house, and what you plan to do with the money.
How Much Money Do You Need?
There’s no sense in spending a few thousand dollars on a “cash out” (refinance) just to get a few thousand dollars out.
We’ve had people call us to pull $20,000 out of their mortgage, yet the transaction costs were $4,000. In addition, their current interest rate was very similar to the rate they would be getting. Their payments would have gone up! It doesn’t make sense for the amount of money they needed.
What Are Current Interest Rates?
If your 30-year fixed mortgage with a $200,000 balance is at 3.25%, you don’t want to refinance in a market where interest rates are 4.5% — just to get out $20,000.
How Long Do You Plan to Stay?
It can make sense to consolidate your debt by wrapping up your first mortgage and other debt all in one loan — as long as you’re going to be there long enough to see the benefits.
If you’re looking to do home improvements or debt consolidation for a smaller amount, but you’re not planning to stay in the house that long, many times it’s cheaper just to go get a home equity line of credit. That’s because the transaction costs are so much less than they are on a full mortgage.
You’ll need specific advice for your specific situation. It’s best to sit down with a local lender and let them help you walk through the different scenarios.
— Ben Chenault,
Certified Mortgage Planner
MortgageBanc / Fairway Nmls# 2289
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