Question:

What should we know about the cash-out refi mortgage?

Answer:

Firstly, the cash-out refi mortgage is a consolidating loan that can be used to either rid you of a first mortgage and bring you additional cash, or help you get aligned with payments falling behind. Certainly, in the second case you may end up turning short-term obligations into one long term consolidation account used as a lien to your property. You have to be very careful if you decide on a cash-out refi mortgage for this particular purpose.

Secondly, a cash-out refi mortgage is designed to replace your existing first mortgage and not add over it. As such, it will possibly have lower rates than a second mortgage but much higher closing costs, as well.

Thirdly, it is much easier to qualify for a cash-out refi mortgage than for a first mortgage. Hence the temptation to borrow more money than you need. Should you do that? Yes, if you have a smart investment plan. No, if you are going to spend the money on a vacation. Don't forget you'll have to pay back every single dollar borrowed.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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