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I believe in a refi if you take cash out then all of your mortgage interest is not deductible for tax purposes, unless you can show that you used the money to improve your home. Bottom line, it makes things messy.

A better option, IMO, would be to refi at a lower rate, then get a home equity line at prime, now at 4%, w/ no fees the first year, maybe $50 a year after that. Sometimes you can get the first 6 mos. at prime minus 1%.

Technically, interest on an equity line is not deductible unless you use the money to improve the home - in practice, people deduct it even if the money was used to buy a car.

The point another poster made is critical - you need discipline to pay the equity line off as soon as possible.
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