Another way to make refinancing a mortgage work for you is to refinance for more than the balance remaining on your old mortgage; tapping your home equity. Thanks to low rates, you may be able to do so without increasing your monthly mortgage payment. One example: at 7.5%, the mortgage payment on a $200,000, 30-year mortgage is $1,398. But at 6.5%, that same payment lets you borrow $20,000 more.
There are no fixed rules when you get cash from refinancing a mortgage. The best bet is to discuss with your mortgage broker exactly what you want and he or she should be able to work with you. You need to be realistic also; of you need 100% loan-to-value at 6.0% interest rate on a mortgage refinance, and you have poor credit, and can’t verify your income, your mortgage broker will work with you, but you may need to adjust your expectations.
The main reason people get cash out is to consolidate higher rate bills. Not only can you get a lower mortgage rate by refinancing these into your new mortgage, but you also may be able to deduct the interest that you pay on your taxes. If your debt to income ratio is in line, you can have your choice of how you want to spend the cash you get from refinancing.