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Cash-in Refinance: The new Trend??

There is no doubt that the real estate market is changing--and one of the top signs is the new-found popularity of the cash-in refinance. In the fourth quarter of 2010, 46 percent of homeowners who refinanced their first mortgage actually brought money to the table to diminish their principle balance. Cash-in refinancing used to be rare and limited to people who had come into a windfall and wanted to pay down their mortgage. In today's financial market however, cash in refinance has become quite normal. There are three main reasons one should consider cash-in refinance.

Avoiding PMI (private mortgage insurance) is one of the main reasons many homeowners are trying cash-in refinance. If a homeowner purchased their home four years ago and made a 20 percent down payment to avoid PMI, they may have found that the value of their home has depreciated--and that they now have less than 20 percent in equity. By paying down the balance, homeowners (in this situation) can avoid adding to their monthly payments with insurance and can keep their rates down low.

Confirming Loan Limits: If one wishes to apply for a conforming loan or wants to keep a low interest on their savings, cash-in refinance can definitely help. For example, if someone owes $475,000, it may be worth $58,000 to bring the loan balance under the limit and take advantage of a lower mortgage rate.

Financial Planning: The most important reason to consider cash-in refinancing goes beyond lowering one’s mortgage payment; as they must consider their all-around financial plan. Homeowners should be certain that they have an ample emergency fund and that they are saving for retirement. Homeowners must also be certain that their other debts are in order--for example, if one has a high credit card debt, it is best to take care of that before paying down their mortgage. When considering a cash-in refinance, all homeowners should assess their goals and their overall finances before making a solid decision.

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