Refinancing Mortgages
A refinancing mortgage lets you tap your home equity to get the cash you
need. It can be a great way to pay for home improvements, consolidate debts, or
make a large purchase.
How refinancing works
A refinance replaces your current mortgage with a new loan for a higher
balance. Your new mortgage pays off your old one, and you receive the
remaining loan amount in cash. That cash comes out of the equity in your home.
Because it lets you borrow from your equity, a cash-out refinance is similar
to a home equity loan. The major difference is that a home equity loan
doesn’t pay off your first mortgage it gives you just the cash you need,
which you repay along with your mortgage.
Benefits of refinancing
Borrowing against the equity in your home is generally
cheaper than other types of financing, and it may have tax advantages as
well. Credit cards and personal loans usually have much higher rates than home
loans, and the interest isn’t tax-deductible.
Refinancing may also reduce your monthly mortgage payments, if the loan term
is longer than the remaining term on your existing mortgage.
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