Mortgage interest rates are currently at or near historical lows over the past 50 years. Now is the time to take advantage of these low rates. One vehicle to do this a Cash Out Refinance.
Refinance mortgage rates tend to be lower than the interest rates on other types of debt, so it’s a very cost-effective way to borrow money. If you use the cash to pay off other debts such as credit cards or a home equity loan, you’ll be lowering the interest rate you pay on that debt.
Mortgage debt can also be repaid over a considerably longer period than other types of debt, up to 30 years, so it can make your payments more manageable if you have a large amount of debt that must be repaid in 5-10 years.
If market rates have dropped since you took out your mortgage, a cash-out refinance can let you borrow money and reduce your mortgage rate at the same time.
From a tax perspective, mortgage interest is generally tax-deductible, so by rolling other debt into your mortgage you can deduct the interest paid on it up to certain limits, assuming that you itemize deductions.
If you use the funds to buy, build or improve a home, you can deduct mortgage interest paid on loan principle. But if you use the proceeds from a cash-out refinance for other purposes, such as education expenses or paying off credit cards, the IRS treats it as a home equity loan, please consult your tax accountant regarding these specific interest deductions.
As explained above, there are numerous advantages for refinancing but you have to keep in mind that in small amounts, it may not make refinancing feasible because of final closing costs on the total loan amount.
Mike Lane
Office: 844.788.7237 x5263
Cell: 860.917.7629
NMLS: 2043605
