Refinancing Provides Funds for Improving Finances, Lifestyle

By Karen Lawson
Local Lender Columnist
Sep 21, 2007
Many homeowners consider refinancing a great way to reduce mortgage interest rates, but refinancing can also supply cash for paying off high interest consumer debt, remodeling your home, or starting a business. The ability to access cash by refinancing depends on how much home equity you have.

Home equity is typically calculated by subtracting the amount of your mortgage balance from the current value of your home. Free home value estimates are available online, but it's important to remember that these tools are designed to provide approximate valuations. Your lender will require an appraisal as part of the refinancing process.

Comparing Interest Rates Useful When Refinancing

If you have an adjustable rate mortgage (ARM), you may want to refinance to a fixed rate, or other mortgage product that reduces your interest rate or monthly payment. If you're carrying balances on credit cards and/or consumer loans, it's a good idea to compare the cost of these accounts to the cost of refinancing. It may be worthwhile to take additional cash from refinancing to pay off credit card debt.

Another option is to use cash-out refinancing to pay for home improvements and updates. New kitchen cabinets and appliances? A master suite and retreat? Cash out refinancing can fund a variety of projects at reasonable rates. Improvement projects can add value to your home. A Seattle area real estate agent or broker can supply information about which improvements can potentially add the most value to your home. Cash-out refinancing can be a great way to enhance your home or refurbish your household budget.

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.