All About Cash-Out Refinancing in New Jersey

By Allison E. Beatty
Local Lender Columnist
Feb 21, 2007
If your New Jersey home has seen record appreciation in recent years, you probably have some equity that can be put to good use. Many home owners are opting for cash-out refinancing to tap into those funds. Here's how they work.

Cash-Out Refinancing Explained

In cash-out refinancing, you'll secure a new New Jersey mortgage to replace your current one. In the process, you take some of your equity in cash.

For example, say you want to take out $15,000 to pay off medical expenses, and have a mortgage balance of $200,000. Your New Jersey neighborhood has seen good appreciation, bumping your home's value to $275,000. A cash-out refinancing will give you access to more than enough funds to cover your bills.

Mortgage Interest Rates Are Key

As you weigh your options, pay close attention to current interest rates. If interest rates are lower today than when you took out the original mortgage, then refinancing makes sense. If rates are higher, however, study the payment structure and consider how important the funds are to you. Your goal is to manage difficult expense – not land yourself in unnecessary debt.

Private Mortgage Insurance

As you consider cash-out refinancing, think carefully about how much equity you want to borrow. If you borrow enough to put your equity below 20 percent, you'll have to pay private mortgage insurance. In this scenario, it might be more beneficial to take out a home equity loan.

A cash-out refinancing can be a valuable tool for tapping into your home equity. Look closely at interest rates and related fees to see whether it works for your situation.

Source
www.bankrate.com

About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing columns for 15 years.