Need Cash Flow? Refinancing Can Help

By Karen Lawson
Local Lender Columnist
Nov 5, 2007
California homeowners who have owned their homes for a few years may have a significant amount of home equity. Refinancing can provide cash flow for starting a business or debt consolidation.

Refinancing 101: Assessing Your Needs

There are times when additional cash comes in handy. Depending on the type of mortgage you choose, refinancing can provide cash from your home equity, or can get you lower mortgage payments. You'll want to know how much cash you'll need, and for how long. This can help you decide how to refinance your mortgage to meet your needs while avoiding unnecessary use of home equity. The most popular reason for refinancing is to lower your home mortgage rate.

Many homeowners also pay off high interest consumer debt with cash-out refinancing. Cash-out refinancing can also provide funds for home improvements or starting a business. It's a good idea to consult a financial advisor before tapping into a large amount of home equity. California real estate professionals can provide estimates of local market trends, and their potential impact on home equity.

Short Term Needs: ARM Loans

An adjustable rate mortgage (ARM) with a low initial rate can boost your cash flow for a finite period of time. Low initial payments can help when you're finishing graduate or professional school, but beware of mortgage loans that require negative amortization, or adding unpaid interest to your mortgage balance. If you have plenty of home equity, refinancing for a lower payment can be useful for returning to school, staying home with your kids, or providing cash flow for your business. Balancing immediate needs with long term realities can help you get the cash you need while protecting home equity.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.