Cash-Out Refinance: Accessing Home Equity
A cash-out refinance allows you to replace your existing mortgage with a new one for more than you currently owe and receive the difference as cash at closing.
This option is commonly used by homeowners who have built equity and want to put it to work.
Common Reasons for a Cash-Out Refinance
Homeowners often use cash-out refinances to:
- Remodel or repair a home
- Consolidate higher-interest debt
- Pay for education or major expenses
- Build reserves or improve cash flow
How Cash-Out Refinancing Works
- New loan is based on current home value
- Loan amount is subject to loan-to-value limits
- Appraisal is typically required
Important Considerations
- Impact on monthly payment
- Potential for improved monthly cash-flow if paying off high-interest rate debts
- Long-term interest cost
- How long you plan on retaining the subject property
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