Now is a great time to refinance your mortgage

Interest rates are low again, which means it’s the perfect time to refinance. There are two types of mortgage refinance: rate-term refinance and cash-out refinance. No cash allows you to adjust just the terms of your home loan. Cash-out refinancing lets you change terms while allowing you to turn home equity into cash. We’ll walk you through how a cash-out refinance works and some of the perks of going through the process.

Let’s talk cash-out refinance

Cash-out refinancing allows you to draw on the equity you’ve built in your home. The equity you’ve built can be an increase in value of your property, the money you’ve paid into your current mortgage, or a combination of the two. Your cash-out loan is usually for an amount larger than your original mortgage, and you can withdraw the difference as cash to help with your finances, invest in yourself or your property.

Six common ways you could use a cash-out refinance: Home renovation

Need to reshingle the roof? Want to build a new nursery for a baby on the way? Maybe you live in an antique property and want to do a complete restoration. You’ll probably need a quick infusion of cash to get these projects off the ground. A cash-out refinance would definitely help, and those home improvements can help raise the value of your home.

Debt consolidation

High interest debt is hard to pay off. You may be making large interest payments on auto loans or credit card bills each month without even touching the principle. A cash-out refinance loan could help pay off high interest debt and consolidate it under a single low interest loan. In some scenarios, people were able to raise their credit scores in the process. One key caveat: choosing to consolidate debt under a cash-out refi without improving your spending habits could spell big trouble. If you’re mindful, however, a cash-out refinance is a great tool to help you get off the high interest treadmill.

Student loans, tuition fees, and college funds

If your priorities lean towards education, a cash-out refi could help. You can use the extra cash to pay off student debt, invest in your child’s education, or even go back to school and get your masters degree.

Retirement funds

It’s never too early to start thinking about retirement. If you’ve been putting off saving and think your retirement fund needs a boost, cash-out refinancing might be the way to go.Investing in new properties

Been eyeing a vacation home or investment property?

The money you receive from your refinancing could help you keep some of your cash reserves while you put a down payment on a new property.

Buyout a co-borrower

If you have a co-borrower on your mortgage and you’re interested in sole ownership of the property you may need to buy them out. This could be a parent who helped you with your down payment, or it could be a former partner as part of a divorce settlement. No matter the reason, you’ll need cash on hand to buy out their interest. A cash-out refinance can help with the buyout as well as the title adjustments you’ll need.

Things to consider

here are pros and cons to any loan and this is no different. On the one hand, you’ll have to rebuild equity in your home, but, on the other, you’ll have cash on hand to invest in your future. Another thing to think about is that you have to factor in closing costs and appraisal fees.

Ultimately, it’s up to you to decide if this is right for you, but a Mortgage Expert can help you get a better picture of how a cash-out refi fits into your life. We don’t work on commission, so our main goal is making sure you make the right choice.

This article was originally published on better.com