Refinance Your Mortgage
If you can improve your interest rate by at least two percentage points, then it is a good time to refinance. While that may work as a general rule, the truth is that there are many reasons to refinance.
If you already have substantial equity in your home, you can access it through a “cash-out refinance” mortgage.
What is home equity? Home equity is the difference between your home’s fair market value and the total balance of any liens or mortgages on your home. Think of it as your ownership interest in your home.
Home equity accumulates in four ways:
Money committed in the original down-payment
Appreciation in the local housing market over time
Physical improvements or renovations to the home
Principal payments on the mortgage itself
Through these four avenues, cash value—or equity—steadily builds up in the property.
Putting your equity to work for you
The good news is that the cash in your home doesn’t have to stay “buried.” If you’ve been thinking about paying off credit card debt, saving money for your children’s college, making home improvements, or adding to your retirement fund, you can put your equity to work for you.
In addition, if an unforeseen expense arises—or your employment situation changes—your home’s equity can help.