With the current state of the economy, more and more people are considering cash out refinance as an option to buy a new home. Cash out refinance involves a borrower taking out a new loan that is larger than their current loan, and the difference being used to pay off the previous loan and provide the borrower with extra cash for another purpose. This process can be a great way to cover the cost of buying a new home, as long as a few factors are kept in mind.

1. Increased Borrowing Power: Cash out refinancing provides borrowers with increased borrowing power. With a cash out refinance, you can increase the amount of money that you have available for the purchase of a new home. This can provide you with more leverage to negotiate a lower price or a better mortgage rate.

2. Improved Credit: Cash out refinancing can also help to improve a borrower’s credit score. Since the borrower is taking out a new loan, the new loan can help to bring up the credit score of the borrower. This can ultimately help them to qualify for a better loan and get a good deal on the purchase of their new home.

3. Tax Benefits: Cash out refinances can also have the benefit of providing tax savings. Depending on the jurisdiction, the interest paid on the cash out portion of the loan may qualify as a tax deductible expense. This can save you money in the long run.

4. Cost Savings: Finally, cash out refinancing can provide cost savings. By taking out a new loan, you may be able to get a lower interest rate on the loan, or reduce the amount of points that you pay. This can reduce the cost of the loan and provide you with additional savings.

Overall, cash out refinancing can provide borrowers with significant advantages. It can give you increased borrowing power, help improve your credit score, provide tax savings, and help you save on cost. Make sure that you consider all of these factors when deciding if cash out refinancing is the right option for you.