With cash-out refinancing, you refinance your mortgage for more than you currently owe, then pocket the difference.
Pay Off High Interest Loans
Home Improvement Loans
Utilize Equity for Other Investments or for Extra Cash Flow
Cash-out Refinancing Explained
Here’s an example: Let’s say you still owe $80,000 on a $150,000 house, and you want a lower interest rate. You also want $20,000 cash, maybe to spend on your child’s first semester at Princeton. You can refinance the mortgage for $100,000. Ideally, you get a better rate on the $80,000 that you owe on the house and you get a check for $20,000 to spend as you wish. Cash-out refinancing differs from a home equity loan in several ways:
A home equity loan is a separate loan on top of your first mortgage.
A cash-out refinance is a replacement of your first mortgage.
The interest rates on a cash-out refinancing are usually, but not always, lower than the interest rate on a home equity loan.