What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a new, larger loan and you receive the difference in cash at closing. For example, if your home is worth $500,000 and you owe $300,000, you might refinance for $380,000 and receive $80,000 in cash. The funds can be used for home improvements, debt consolidation, education expenses, or other needs. Cash-out refinances typically allow up to 80% LTV on primary residences for conventional loans. Your new loan will have a higher balance than before, and depending on current rates, possibly a higher rate. Consider the long-term cost versus the benefit of the cash received.