Cash-out Refinance
A Cash-out Refinance is a type of mortgage refinance where a borrower takes out a new mortgage for an amount greater than the outstanding balance of their current mortgage. The difference between the new loan amount and the existing mortgage balance is received by the borrower in cash at closing.
This differs from a Rate and Term Refinance, which focuses solely on changing the interest rate or loan term without extracting equity. Borrowers typically use the cash from a cash-out refinance for purposes such as home improvements, debt consolidation, or other significant expenses. The amount of cash a borrower can receive is generally limited by the amount of Home Equity they have and the lender's loan-to-value (LTV) requirements.
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