Benefits of a cash-out refinance

Lower interest rates: A mortgage refinance typically offer a lower interest rate than a home equity line of credit, or HELOC loan.

A cash-out refinance might give you a lower interest rate if you originally bought your home when mortgage rates were much higher. For example, if you bought in 2000, the average mortgage rate was about 9%. Today, it’s considerably lower. But if you only want to lock in a lower interest rate on your mortgage and don’t need the cash, regular refinancing makes more sense.

Debt consolidation: Using the money from a cash-out refinance to pay off high-interest credit cards can save you thousands of dollars in interest.

Higher credit score: Paying off your credit cards in full with a cash-out refinance can build your credit score by reducing your credit utilization ratio, the amount of available credit you’re using.

Tax deductions: The mortgage interest deduction may be available on a cash-out refinance if the money is used to buy, build or substantially improve your home.