A cash out refinance loan is simply a loan typically on the equity in a home, which is for greater than the amount actually owed on the home. The difference between the actual amount owed and the amount of the new loan, is returned to the buyer in the form of a “Cash Out".

There are many reasons why people do Cash out refinance such as home improvements, extra cash, medical bills, debt consolidation or other emergencies that may arise.

Cash out refinance loan sometimes has a higher interest rate then your current loan; it replaces you getting a HELOC or second mortgage on your home by pulling out the equity you’ve built in your home.

The refinance will include any liens, prepayment penalties and cost associated with obtaining the new loan prior to you getting cash out.

Cash-out refinancing differs from a home equity loan in several ways:

• A home equity loan is a separate loan on top of your first mortgage.
• A cash-out refinance is a replacement of your first mortgage.
• The interest rates on a cash-out refinancing are usually, but not always, higher than the interest rate on a home equity loan.
• You pay closing costs when you refinance your mortgage.
• Generally, you don't pay closing costs for a home equity loan.
• Closing costs can amount to hundreds or thousands of dollars.

Is cash out refinancing right for me?