If you are underwater on your present mortgage you probably think refinancing is insane. But with the low interest rates available for homeowners with good credit it may make sense.
What is Cash In Refinancing?
Cash in Refinancing is the cousin of cash out refinancing that was all the rage in the early part of the century. With cash out refinancing you would refinance your mortgage to get money out of it to spend on other things.
With cash in refinancing you reverse the trend. Typically done by people who are slightly upside down on their mortgage, those that are doing a cash in refinance of their mortgage bring money to the table in exchange for getting a much better rate on their mortgage and saving money in the long run.
Who Would Do This?
Surprisingly, according to a report from Freddie Mac, 18 percent of refinances done in the first quarter of 2010 were cash in’s. If you are planning on staying in your home for the long term, the math makes sense. Lowering your interest rate will more than pay back your re-investment into the home. This especially makes sense if you have money sitting in a low interest savings account or an investment that you want to liquidate.
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Before making this decision you also need to factor in the costs of any payout penalty that might be “blended” into the new mortgage principle. Investigate all options prior ro refinancing your home to be sure that in the end you are saving money not just spending more.