Is it a good idea to refinance to pay off your bills?

[David Strong]

Pulling equity out of your home is an option that home owners have thats a great way to pay off bills. Is it a good idea to refinance your home to pay off your bills? My opinion is yes reason being you boost up that credit score and youre current on your bills what a great deal. Now keep in mind you have to stay on top of your payments and dont be late. Do you have a better process that would help me out?

[Mangie]

Hi David,

Please see the pros and cons when considering a cash out refinance.

Pros

•A Cash out refinance can supply you with a lump sum of money, you can use this money at your discretion.

A Cash out refinance can be a very helpful with regards to paying of debt where the interest rate is NOT tax deductible. In which case you may see a tax benefit.

•A cash out refinance was a common practice a few years back; however with the housing crises most home owners lost most, if not all of their equity. If you were one of the lucky ones, a cash out refinance can be easy to qualify for, but be cautious.

•Interest rates can be lower on cash out refinance loan than that of a home equity line, always review your options, before making the final decision.

• If you are able to get a lower interest when doing your cash out refinance then you really have a good situation.




Cons

•A cash out refinance can cost hundreds, and in some case thousands of dollars in upfront closing costs.

•A cast out refinance may not be worth the trouble if you cannot achieve a lower interest rate.

•A cash out refinance can cause you to have to pay a hefty fees to a PMI (Private Mortgage Insurance) and that is dependant on what percent you borrower vs. the value of your home.

•Lastly, in the current economic situation and the continuous drop in home values, you could make your matters worse.