Mortgage: Cash-in Refinance

Here's an interesting thought. Instead of pulling money out of your equity when refinancing your home, consider putting some cash into your equity. The strategy would be to get a considerably lower rate and a shorter term than 30 years. It will pay off your mortgage sooner, build equity faster and save lots of money in interest.

If you have some extra cash available, this might be very attractive compared to what your are earning currently on those savings.

Take for exampe the following scenario: the current mortgage is at 5% for 30 years with payments of $939.44. The owner can refinance for 15 years at 3.875%. If they put $30,000 into the refinance, their payments will be slightly more than the current $1,011.06 but the mortgage will be paid off in 15 years. At that same point, if they keep the current mortgage, their unpaid balance will be $101,572.88. In order to have the same payments as the mortgage they're refinancing, they'll need to add $39,764.68 to the refinance.

If you have a goal to get your home paid off and you have some funds available, a cash-in refinance may be just the strategy for you.