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Cash-Out Refinancing Helps Homeowners Weather Buyer's Markets
By Joe Taylor Jr.
CMR Columnist
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Real estate experts across the country are proclaiming an official "buyers' market" after years of red-hot selling in many U.S. locations. Dropping mortgage rates, which are expected to remain low for at least a year, are putting a spark back into a market that has gone "soft," with new construction and existing home sales slowing.
While the prospects of your home value increasing exponentially may be waning, now is an excellent time for refinancing your mortgage to bank some extra cash. Rates for 30-year fixed mortgages are hovering around 6.3%, the lowest rates since March. This may be the time to consider refinancing, even if your credit isn't stellar.
Prime Candidates for Cash-Out Refinancing
Here are some qualities of good candidates for cash-out refinancing, which will allow you to turn some of your home equity into cash:
- You have been in your house long enough to bank a significant amount of equity.
- The new mortgage rate is lower than the rates on other loans, such as credit card balances, that you'll use the cash to pay off.
Many lending experts also caution home owners to think carefully about how they'll spend the cash from their home equity before refinancing. It may be tempting to spend the $20,000 check on a European vacation or a new car, but remember you'll be paying off that money for the length of your mortgage.
Spending the cash on a life-saving medical procedure, a child's college education or an addition to your house may be a better choice. Refinancing will require you to likely start over on a new 30-year mortgage, but the effects of a good spending choice could last just as long.
Sources
Bankrate.com
USAToday
U.S. Federal Housing Administration
About the Author
Joe Taylor Jr. coaches musicians, entrepreneurs, and other adults that want to shift their careers. He holds a Bachelor of Science in Communications from Ithaca College.
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