A cash-out refinance is different than a traditional refinance
A regular refinance replaces your existing mortgage with a new one, usually to get a lower interest rate or better loan terms. You don’t receive any money from it. A cash-out refinance, on the other hand, gives you money at closing by tapping into the equity you’ve built up in your home.
Home equity is the portion of your home that you truly own. You can calculate it by subtracting what you still owe on your mortgage from the current the value of your home.
Let’s say…
Your home is worth $400,000, and you owe $220,000 on your current mortgage.
You refinance into a new mortgage for $300,000. The new loan pays off the $220,000 you owe and leaves you with the $80,000 difference in cash (minus closing costs).
Why Cash-Out Refinancing Can Work
Cash-out refinancing is a great option for qualifying homeowners who want access to funds without using credit cards or personal loans. It can be a smart strategy for consolidating debt or making investments that build long-term value.
Access to Cash: Use your home equity without selling your home
Lower Interest Rates: Refinance rates are often lower than credit card or personal loan rates
One Monthly Payment: Roll everything into one bill
- You Can Use the Funds for Whatever You Want: Surprises, good or bad, can be expensive. Cash-out refinancing gives you a legitimate way to pay for them when they come your way.
You Can Use the Funds However You Want
You can use cash-out refinancing funds for whatever you want, but here are a few of the reasons we hear regularly:
Home renovations or repairs
Paying off high-interest debt
Tuition or education expenses
Investment opportunities
Building an emergency fund
What You Should Consider Before Refinancing
Cash-out refinances can be helpful, but they aren’t right for everyone. Before you jump in, make sure you consider all of the facts, like:
Closing Costs Apply: Similar to a traditional refinance
Higher Loan Balance: You’ll owe more than before
Reduced Equity: Less ownership stake until the new loan is paid down
There Are Limits: You probably won't be able to access your entire equity amount.
Get Personalized Guidance
A cash-out refinance looks different for everyone. We can walk through your options and help you decide if it’s the right move based on your financial goals.
