Cash-Out Refinance
Refinancing your existing mortgage into a larger loan and taking the difference in cash. Used to access home equity.
A cash-out refinance replaces your existing first mortgage with a new, larger loan. The difference between the new loan amount and what you owed is paid out to you in cash at closing. Common uses: home renovation, debt consolidation, investment, education. Cash-out is generally capped at 80% LTV on conventional loans, 80% LTV on FHA, 90% LTV on VA. Closing costs are similar to a purchase loan (full title insurance, full appraisal).
Related terms
Rate-and-Term Refinance
Refinancing to lower the rate or change the term, without taking cash out. Lower closing costs than cash-out.
HELOC (Home Equity Line of Credit)
Revolving credit line secured by your home equity. Lets you borrow against equity without refinancing your first mortgage.
LTV (Loan-to-Value)
Loan amount divided by property value, expressed as a percentage. Lower LTV usually means lower rate and easier qualification.
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