Cash-out refinancing allows you to turn the equity you’ve built up in your home into cash, which you can then use however you want. Some people will tell you that this is a bad decision, and this can be true, especially if you plan to spend all the money on vacations or other expensive things. Your home is not an ATM, so you should never gamble it away just to go on that trip you’ve always dreamed about. But having an ATM and not using it is also a poor decision. To help you out, we’ve put together a list of times when a cash-out refinance can be a smart choice.
1. When you want to make smart investments
No investments are 100% safe and those who are less riskier don’t give a high enough return to always make them worthwhile. But there are some that can prove to be a smart choice. Home improvements, for example, can pay for themselves over time.
2. When your other debts are becoming unbearable
Some credit cards come with huge interest rates. By using your home equity, you can both pay off your credit card debt and get a much lower interest rate. In the long run, you will end up saving money.
3. When you want to protect your credit score
A bad credit score can result in numerous headaches. Paying off your credit cards in full with a cash-out refinance will not only allow you to avoid these unwanted situations but also to improve your credit score by reducing your credit utilization ratio.
4. When you are faced with unavoidable major expenses
In today’s world, few people are able to put some money aside for rainy days. And we all know that rainy days come more often than expected. Cash-out refinancing can help pay off medical bills, damage to your home, your child’s college fees or even those very expensive special life events, such as weddings.
