Your child means the world to you, and for some reason, you just haven't put enough in a savings plan for college tuition. Plus, he needs a car to get back and forth to his classes. You figure a cash-out refinance mortgage could solve those problems and help your kid out at the same time. He won't have to take student loans and worry about paying them back in the future. Well, someone is going to pay for all this, and it will be you. There might be better and less risky ways to get that cash for tuition, buy a car or pay for other big-ticket items.
A home equity line of credit might be the answer. You can pull money out of it when you need it — like each semester for his college tuition. You can get the money quickly without refinancing your entire original mortgage, and you won't have to pay hefty closing costs. But home equity loans still put your home at risk if you default. You can also help your child to fill out the Free Application for Federal Student Aid (FAFSA). You can't receive financial aid at a college unless you apply. And remember that if your child does take out federal student loans, these offer a few protections if borrowers run into trouble paying them off in the future, according to Federal Student Aid, an office of the U.S. Department of Education. If you pay the tuition with a cash-out refinance, those protections go away. Plus, if you really need to buy a car, check out all low-interest rate offers, including 0 percent rates, at car dealerships these days. Paying for a car loan for 5 years might work to your advantage compared to adding it in to your mortgage and paying for it the entire 15 to 30 years.