Taking out Cash

The equity in your home, wherein equity is defined as the difference between what you still owe on your property and what your property is currently worth on the open market, is the same thing as cash that is just sitting there, unused. With home prices going up at sometimes astronomical rates, many people are looking at a considerable amount of cash equity in their property and they would like to know the best way to get their hands on some of that cash.

One way to take equity cash out of a property is to refinance the existing first mortgage. Refinancing a mortgage simply means that you take out a brand new first mortgage loan on the property and use the proceeds of the new loan to pay off the original loan. This makes the most financial sense when interest rates have dropped by at least one percentage point below what they were on the original first loan.

The way you get your hands on the equity that has built up is by taking out a new first loan that is larger than the original loan, based on the new, higher value of the property. If your property has appreciated in value by $50,000 and your new loan is for $50,000 more than your old loan, you will have $50,000 left in your pocket after paying off the old loan. When all is said and done, the $50,000 is your equity and, therefore, yours to spend any way you wish.

As with any loan, you must weigh out the advantages and the disadvantages before making a final commitment, but if interest rates have dropped and you’d like to use some of the equity that is just sitting, unused, in your home, then a new first loan to refinance your mortgage may be the answer for you.