mortgage

5 reasons to get a new mortgage in 2012

Refinancing to cash out
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Refinancing to cash out

A home equity loan or line of credit can be a good way to get cash for a variety of financial needs such as remodeling, major home repairs, paying off other debts or financing a college education.

The benefits, Lopatin says, include immediate cash, low-cost debt and potentially an income tax write-off.

Of course, there's a catch: You can't borrow against your equity if your mortgage debt exceeds your home's value.

"They have to be able to income-qualify for the increased loan amount, and the cash-out limit (means) they have to have a bigger equity cushion than a rate-and-term refinance," she says.

And along with the catch is a caveat: taking out cash isn't free money. In fact, a cash-out refinance increases your debt, which is "just not wise today," says Alfred McIntosh, principal of McIntosh Capital Advisors, a financial planning and investment management firm in Los Angeles.

"Part of the reason we're in this economic situation is that, for a long time, we used our homes as checking accounts," he says. "We need to break the cycle of constantly inflating our mortgages."


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