Cash-Out Refinance

Real Estate

Cash-out refinance replaces your existing mortgage with a larger one, taking the difference as cash. Example: $500,000 home with $200,000 existing mortgage; refi to $400,000 mortgage, receive $200,000 cash (minus closing costs). Use cases: home improvements, debt consolidation, investment property down payment, major purchase. Cash-out refi typically has slightly higher rates than rate-and-term refi. Considerations: extends loan term, increases monthly payment, requires sufficient equity and qualifying income. Tax treatment: interest deductible only if used for home improvements (post-2017 TCJA). Alternative options: HELOC for flexible drawdown, second mortgage, personal loan (no collateral).