Refinancing means getting a new mortgage with a lower rate to pay off the one you already have.
A cash-out refinance is when you refinance your current mortgage and take out a lump sum of money from your equity to use for other things. Like home repairs, college tuition, a family trip, and so on.
People also use a cash-out refinance to invest in real estate or start their own business with the equity in their home.
When used in the right way, cash-out refinances are very useful tools. Cash-out refinancing is not a good idea if you will get a higher interest rate than you do on your current mortgage.
If the rate on your current mortgage is really good, you should not change it.
But if you want to use the equity you've built up in your home without changing your mortgage, you might want to look into a Home Equity Loan.
With a home equity loan, you can use the equity you've built up in your home to get cash without having to pay off your first mortgage. The loan against your home's value is also called a second mortgage.
For example, if your home is worth $50,000 and you have built up $50,000 worth of equity, you can borrow what you need from that equity without affecting your first mortgage.
The cash-out refinance and the home equity loan are very similar and almost serve the same purpose. The right choice for you will depend on your situation.
As always, I'd like to remind you of something. Do your research, learn as much as you can, and compare prices to find the best deal.
