Interested in Cash-Out Mortgage Refinancing? Here's what you need to know.

With rates on 30-year mortgages nearly a percentage point lower than they were last year, homeowners have been refinancing and cashing out equity. However, there are a few things to keep in mind. #REFINANCE

Cash-out refinancing allows homeowners to refinance a mortgage and borrow cash. Tapping your home for cash can be a smart thing to do. The process is simple and interest rates are low. The strategy is useful for homeowners in their 30s to early 50s who want cash for a home improvement project, pay off debt or finance college for their children.

Keep in mind, if you are replacing unsecured (credit cards) with secured debt, you could lose your home if you default.

For older people, the idea may not make financial sense. We would be stuck with mortgage payments while our income may be diminishing.

Money from a cash-out refinance should be used as an investment rather than an expenditure. It may also have a higher interest rate than regular refinancing, because the cash-out portion makes the loan bigger.

You will also incur closing costs, generally 3% to 6%. There may also be a state or local mortgage-transfer tax.

Another popular alternative is a home equity line of credit. A Heloc is less expensive, with no closing costs and mortgage transfer taxes. However, interest rates are generally higher. Call Vanmar Lending in Palm Desert to see if cash-out refinancing works for you.