Debt Consolidation With a Cash-Out Refinance
“I need $50,000 to refinance credit card debt. Is it better to refinance my existing mortgage (with a balance about $140,000) into a new $190,000 mortgage, or should I borrow the extra $50,000 with a home equity loan?”
Cash-Out Refinance Versus Second Mortgage
The most important factor determining whether a debt consolidation is cheaper using a second mortgage or a cash-out refinance is the current level of interest rates relative to those at the time the first mortgage was taken out. If current levels are lower, a cash-out refinancing is likely to be better because the new first mortgage can have a lower rate than the existing one. If current rates are higher, on the other hand, a second mortgage is likely to prove cheaper. However, many other factors enter the equation. Here is a more complete list.
* The interest rate and points you have to pay to refinance the first mortgage, compared with the same costs for a second mortgage.
* Any mortgage insurance requirement on the new first mortgage.
* The interest rate, mortgage insurance, and period remaining on the term of the existing first mortgage.
* The term you select on the new first relative to that on the new second.
* The amount of cash you need.
* Your income-tax bracket.
* The length of time you expect to remain in your home.
* The interest rate you can earn on savings.
source:http://www.mtgprofessor.com/A%20-%20Debt%20Consolidation/consolidating_with_a_cash-out_refi.htm
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