What is a Cash Out Refinance?
A Cash-Out Refinance uses a borrower’s home’s equity to refinance for more than the outstanding balance owed on their current mortgage. Then, after paying off the original mortgage, the amount left over is used to payoff the borrower’s other debt or for other needs (e.g. remodel, tuition, their business, etc.)
Cash Out Refinance Features
- A cash-out refinance is a new first mortgage, not a second lien loan such as a Home Equity loan or HELOC
- In general, the more home equity they have, the more money their cashout refinance may provide
- Use the extra cash as they need–consolidate debt, remodel, tuition, even buy a second home
Note: By refinancing an existing mortgage, the total finance charges may be higher over the life of the mortgage.