Should I use a cash-out refinance to pay for an addition on our home?

Author: Rob K. Blake | Date: May 25, 2008 | Filed In: Refinancing Answers

I would need additional information to give more specific advise on a cash-out refinance to pay for home improvement, but I’ll try without it.

First, a first mortgage cash-out refinance should most likely be avoided since the loan amount will be much bigger than the cash needed and therefore all the costs will be correspondingly bigger as well.

This advice would change if your existing first mortgage has some “bad” terms like an adjustable rate or a balloon payment you’d need to get rid of anyway. A cash-out refinance in that case would kill two birds with one stone.

Barring that though, the best way is usually a home equity loan of one kind or another. Home equity loans fall into two basic types: adjustable rate equity lines of credit and fixed rate, fixed term second mortgages.

Both have pluses and minuses, and I suggest you read all the post in our Equity Loans category is see all the differences because they are too numerous to list here.

Great question!

Author: Rob K. Blake