Refinancing Your Home

If you're planning to stay in your home for a number of years, it's a good idea to take advantage of low interest rates. Just as when you obtained your original mortgage, you can also get points, which means paying off a percentage of your loan amount. If you have extra cash available, this can be helpful. Each point is one percentage of the total amount of your loan. By adding points, you can lower your interest rates.

You can also "cash out" by refinancing for more than the principal due on your original home loan. This is essentially a means of getting some cash as a tax-free loan on the difference between the value of the house now and its value from the initial mortgage. For example, if you have a mortgage balance of $100,000 and your property is now worth $300,000, you could refinance for $175,000 and have $75,000 to keep tax-free, less the transaction costs and fees. According to Freddie Mac, one of the nation's premiere mortgage secondary lenders, nearly 60 percent of refinancing today is for the purpose of cashing out.