What is a cash-out refinance?

A refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement or any other purpose. A refinance mortgage loan where the new loan is more than the money owed on the current mortgage. The difference between the new loan amount and what's owed, is the "cash out." How much cash depends upon the home's equity.

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