Best Answer by Dale H

If you could get 6% on a cash out refinance without PMI and minimal costs, the new first mortgage would give you a lower average cost of funds and monthly payments. On the other hand, if you have to pay a couple thousand in closing costs on a new first, the low closing cost on the 2nd might be better. It may really come down to how much additional borrowing you would be doing at the higher rate vs. what the difference in closing costs is. To do a proper analysis, I would need more information. I would suggest calling a couple banks and having them put together some good faith estimates. The analysis is not difficult so any competent loan officer should be able to help you with it. Watch out for pressure to refinance the first. If you are only borrowing a few thousand on the 2nd (home equity), you are probably going to be better off going that route, the the LO may try to steer you into a new first as they can't make any money on a little loan. Good luck. ... See all 5 answers