 TITLE: Is a Cash-Out Refinance a Good Idea? CONTENT: The Downsides of a Cash-Out Refinance\n-------------------------------------\nCash-out refinancing can also be risky and expensive. Consider these drawbacks:\n*   **You're taking out a larger loan against your home.** Even if you can lock in a lower interest rate, taking on more debt means it may be more difficult to pay off your mortgage. In the meantime, you risk losing your home if you aren't able to afford your payments in the future.\n*   **You'll pay closing costs.** Similar to when you took out your original mortgage, the closing costs on a cash-out refi can range from about 2% to 5% of the total loan amount. While you may be able to roll these costs into your loan rather than pay for them out of pocket, they'll increase your cost of borrowing. Compare your total fees and interest on a cash-out refi to the cost you'd pay to get a loan elsewhere.\n*   **You may have to pay for private mortgage insurance.** If your cash-out refi results in the total loan being more than 80% of the home's value, you may have to pay for private mortgage insurance (PMI). The extra insurance can increase your monthly costs, but it doesn't help you—it protects the lender if you don't repay your mortgage. However, many lenders will not let you borrow more than 80% of a home's value for a cash-out refinance, so this may not be a concern.\nAs with all types of loans, there's also the risk of borrowing money to enable a lifestyle that's outside your means. This can be especially harmful if you use the money to pay off high-rate credit card debt, but then wind up maxing out your credit cards again. END