Cash out refinancing

Strictly speaking, all refinancing of debt is "cash-out," when funds retrieved are utilized for anything other than repaying an existing loan.

In the case of common usage of the term, cash out refinancing refers to when equity is liquidated from a property above and beyond sum of the payoff of existing loans held in lien on the property, loan fees, costs associated with the loan, taxes, insurance, tax reserves, insurance reserves, and in the past any other non-lien debt held in the name of the owner being paid by loan proceeds.

A homeowner who owes $80,000 on a home valued at $200,000 has $120,000 in equity. This equity can be liquidated with a cash-out refinance loan providing the loan is larger than $80,000.

The total amount of equity that can be withdrawn with a cash-out refinance is dependent on the mortgage lender, the cash-out refinance program, and other relative factors, such as the value of the home. .

• A home equity loan is a separate loan on top of a first mortgage.
• A cash-out refinance is a replacement of a first mortgage.
• The interest rates on a cash-out refinancing are usually, but not always, lower than the interest rate on a home equity loan.
• The borrower pays the mortgage refinance closing costs.
• Generally, the borrower does not pay closing costs for a home equity loan.
• Closing costs can amount to hundreds or thousands of dollars.

• California Proposition 13 (1978), U.S.
• Real estate bubble
• Inflation
• Home equity