Cash-out refinance
Also called: cash out refi
Refinancing for more than you owe and taking the difference in cash, converting equity into spendable funds.
The new loan pays off the existing one and returns the difference at closing. Because it raises the loan-to-value, a cash-out is usually priced above a rate-and-term refinance and has tighter limits.
It replaces your entire first mortgage, so it is rarely the right tool when your existing rate is well below the market. A second lien or a HELOC may cost less overall even at a higher rate on the smaller balance.
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Related terms
- RefinanceReplacing an existing mortgage with a new one to change the rate, the term, or both.
- HELOC (Home Equity Line of Credit)A revolving credit line secured by your home equity, drawn and repaid like a credit card during a draw period.
- EquityThe difference between what a property is worth and what is owed against it.
- LTV (Loan-to-Value Ratio)The loan amount as a percentage of the property’s value, the main measure of how much equity cushions the loan.
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