What is cash-out refinancing? – David Reecher
Cash-out refinancing occurs when a borrower refinances his mortgage for more than he currently owes to pocket the difference in cash up front. Homeowners who need cash to pay for a child’s college education or for a new car will often do a cash-out refinance. These loans differ from home equity lines of credit (HELOCs) in that cash-out refinances replace the current mortgage, while a HELOC is a separate loan in addition to the first mortgage. Cash-out refinances often have lower interest rates than HELOCs, but the closing costs are usually higher.