Are there any disadvantages to refinancing and getting cashback at the closing? I've owned for about a year and can get a better rate with zero closing costs and I can cash out a few thousand dollars. Any reason not to do this?

not really - unless it brings your mortgage payment up. Sounds like it would not. So - based on that, you can keep your mortgage where it is (or lower) and end up with some cash in your pocket and thus, won't be using your credit cards with those nasty rates!!! The only disadvantage (which doesn't hava any ramifications - so what?) would be the fact that your total mortgage amount would increase.....but since it affects nothing, it's not a big deal.

Go for it - - and send me whatever you'd like!

It's always in your best interest to refinance your home at a lower interest rate no matter what you do with the $$$, even if it's just 1/2% difference, especially if you just purchased! But if you don't get a lower interest rate, there's not very much incentive to go through the paperwork.

Let's say you have a loan balance of $75,000 at 8% over 20 years. Your payment will be $623.17.

If you get an offer to refinance at 7%, you have three ways of looking at it:

1) If you want to take cash back, don't take more than $5846.50 (less all the fees). This will keep your payment the same, $623.17 and the length of the loan at 240 months.

2) You can reduce your payment to $578.10 for the 20 years.

3) You can take no cash, leave the payment the same and you'll be paying the loan off 35 months earlier.

(If you don't mind posting your loan amounts or emailing me, I can give you better figures, but my answer will probably be the same.)

Zero closing costs? Is there such a thing? If so I say go for it. Especially if it is a better rate as you say. Since you have only owned for a year I am guessing that you put a large down payment on the house and that you are trying to take this cash back out. Most mortgage companies require that you keep an 80% loan to value ratio, at least for townhome refinancing, and will not let you take all of the equity out of your house. First make sure they are really willing to give you this few thousand dollars, and with no closing costs. At settlement there are usually attorney's fees for filing legal documentation of the refinance. Sounds too good to be true.
I refinanced not too long ago and took $3000 dollars out and it hardly changed my monthly payment. But that's three thousand dollars less equity I will have when I go to sell my house and buy a new one. My advice is that if you plan on living there for a long time you will have time to build back up your equity in the home, but talk to a financial advisor and get professional advice first.

We just refinanced and the thing you need to check VERY carefully is any cash out of pocket penalties for refinancing early. Meaning, your mortgage might stipulate that you must keep your mortgage for two years before you van refinance, other wise you pay a penalty, which could amount to thousands of dollars. And our mortgage co. meant it quite literally, not even one day early. We waited the correct amount of time and when we did refinance, our payment dropped about 1,500 dollars.

Although the other answers here aren't "wrong," your question asked whether there are any disadvantages to taking some cash out during a refinance. The answer is YES...there are some risks, as some people found out about 10 years ago during a real estate slump.

The main risk is if real estate prices go down and you have to sell during the slump. And real estate prices have gone down in different areas for a variety of reasons--an economic slump (oil industry collapse in Houston and Denver a while back, for instance), higher interest rates (making real estate less affordable, thereby reducing the number of potential purchasers), and changing neighborhood demographics (a middle-class neighborhood becomes a haven for drug dealers and prostitutes, for instance).

So...you buy a house for $200,000, with a $160,000 mortgage. The house value goes up to $250,000, and you refinance with a $200,000 mortgage. House prices then fall to $200,000. You have to move (maybe you lost your job and received an offer out of town. Or maybe you just lost your job and can't afford the mortgage payments. Enron? WorldCom? Global Crossing? K-Mart? Arthur Anderson? Hellooooo!)

You've got a $200,000 mortgage. Your costs to sell will be roughly $15,000 (real estate commission, other costs). Now, in order to sell, you're going to have to come up with $15,000. And that's assuming you didn't get greedy when you refinanced. If you went from a 20% down mortgage to a 10% down mortgage, then your refinanced mortgage is for $225,000, which means you'll have to come up with $40,000 just to sell your house at $200,000. Trust me...that has actually happened...many times.

And if that's not scary enough, here's another. Consider: If you buy a car and you don't make payments on it, what's the worst that will happen? You lose your car, you get a black mark on your credit report, and you're responsible for any deficiency. But...if you buy a house and don't make payments on it, what's the worst that will happen? You lose your home, along with that black mark on your credit report. Now, what do you plan to do with the extra money from your home refinance? Buy a new car? Bad move. In addition to putting your entire home at risk (rather than limiting the risk to a car), you've now spread the car payments out over 30 years, rather than 3-5. Take a look at the interest on a $20,000 car at 6.5% over 30 years. It'll shock you...but that's what you're doing by opting for a longer loan instead of a shorter one.

Understand, I'm not telling you not to refinance and take some money out (though I personally probably wouldn't do it). But you asked whether there were any arguments against doing so. And the answer is yes.