If you are considering refinancing, it may be helpful to understand the difference between cash-in and cash-out refinancing. During the real estate boom cash-out refinancing was the way to go in most neighborhoods. People would refinance their homes and take out money from the rise in property values. This type of refinancing was great as long as your home value kept going up in value. If you bought your home years ago and the value of your home is still higher than when you bought it, then cash-out refinancing may be for you. Many mortgage brokers sold cash-out refinancing as a way to pay off credit card debt, remodel your home, pay for college or go on a vacation. However, be careful if home values in your neighborhood are still declining, as in this case cash-out refinancing may not be for you.

"Cash-in" refinancing is a new term to many homeowners. According to Freddie Mac 33% of all mortgages in the 3rd quarter of 2010 were cash-in refinances. Cash-in refinancing is when you bring money to the table to lower the principal balance of your mortgage. One may consider cash-in refinancing if the va
lue of their home is "underwater" or worth less today than when they purchased their home. Underwater homeowners may not qualify for today's lower mortgage rates but by bringing money to the closing table a person could lower the principal balance of their mortgage and qualify for a lower interest rate.

Cash-in also helps people from paying the private mortgage insurance (PMI) on the loan. PMI is necessary if the home owner has less than twenty percent equity in the home. Doing a cash-in refinance may bring your equity in your home up to the level where PMI is not needed.
Cash-in refinancing may also help a person lower the length of a mortgage from thirty years to fifteen. If the balance is lower from the cash-in a fifteen year mortgage may look more desirable to the borrower.

Lastly, cash-in refinance may help people lower the balance on a high end mortgage. If the borrower lowers the principal of the loan to the point where a jumbo loan is not needed then the borrower will get a more favorable interest rate on the loan. When considering refinancing it is always good to make sure you will still have money readily available in case of an emergency or the loss of a job.