How Does a Cash-Out Refinance Work?

Transcript

You can turn home equity into cash with a cash-out refinance. But to do it, you refinance your whole mortgage. Here's how it works. A cash-out refinance replaces your mortgage with a bigger one, and pays you the difference in cash. One new loan, at today's rate. Say your home's worth four hundred thousand and you owe two hundred fifty. Lenders often let you borrow up to about eighty percent — three hundred twenty. That leaves roughly seventy thousand in cash. You're not just borrowing the new seventy thousand. Your whole balance becomes a new, larger mortgage — here, three hundred twenty thousand — at today's rate. It's one of three ways to tap equity. A HELOC is a revolving line; a home-equity loan is a second lump sum. A cash-out refinance replaces the first mortgage. Two things to weigh. You re-price your entire mortgage, not just the new money. And closing costs apply. See your own cash-out at worthune.com. Worthune turns money decisions into math you can see and re-run — every assumption named. A friend who's good at math. One note: this is educational only, not financial advice. The figures are illustrative. Your situation is unique — talk to a professional before you act.

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