To Cash-out or Not to Cash-out?


The first rule of thumb is to NEVER take cash out of your home for frivolous purposes or just to get cash to spend. Borrowing against your home is serious business and should be used with caution and only for purposes that improve your financial situation.  For example, some borrowers use a cash-out refinance to pay off credit card debt. This can be a good financial decision provided that you don’t re-open the debt or pay it off on a long-term finance! 

Paying off consumer debt on a short-term basis, through a mortgage, that reduces both the overall payment and the mortgage term, while converting the debt from non-tax-deductible to tax-deductible, can be a smart financial move.  Especially if you apply the monthly savings created back to the mortgage balance to reduce the term even more. 

Here’s the fact: debt is debt – it is all owed, and all has to be paid. If you can convert debt into lower payments at shorter terms with greater tax savings and even help build cash reserves, then you may be making a wise choice and maximizing your home as an asset and financial tool. 

Michael Brucato