After refinancing a mortgage by means of the cash out refinance option, you will have a lump sum of cash on hand because your new mortgage loan will be for a larger amount than the existing mortgage loan on your home. In most cases, you will be able to spend this cash lump sum in any way you choose; however, it is important to spend it wisely. Below are a few great ways to use this cash lump sum so that you will be able to get the most benefit from it.
If you have any form of consumer debt, chances are that you will be paying high amounts of interest on it each month – in some cases, as much as 20-25%. Using your cash out refinance option will not only help you save thousands of dollars in interest on your debt over the long term; in most cases, repaying all of your consumer debt will also free up a large portion of your monthly pay check, which will in turn provide your budget with some much-needed breathing room. Having little to no debt will also allow you to save more money each month for future expenses that will need to be covered.