Cash-Out Refinance
A refinance that replaces your existing mortgage with a new, larger loan and returns the difference to you as cash.
Cash-out refinances let homeowners tap accumulated equity by borrowing against their home's current value. The new loan pays off the old one and you walk away from closing with the remaining proceeds, less closing costs.
Most lenders allow you to borrow up to 80% of the home's appraised value on a conventional cash-out, with FHA and VA programs sometimes permitting higher limits. The rate on a cash-out is generally a touch higher than on a no-cash-out refinance because of the increased risk profile.
Borrowers commonly use cash-out proceeds for home improvement, debt consolidation, education costs, or investment opportunities. The trade-off is that you reset your amortization clock and convert unsecured uses of money into debt secured by your home, a worthwhile move when the math is favorable, a dangerous one when it isn't.
Related terms
Other terms you'll see alongside Cash-Out Refinance
Replacing an existing mortgage with a new one, typically to lower the rate, change the term, or extract equity.
The portion of your home's value you own outright, calculated as current value minus what you owe on the mortgage.
The loan amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower).
A revolving credit line secured by your home's equity, with a variable rate and draw period followed by repayment.
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