Cash-Out Refinance

AAA

DEFINITION of 'Cash-Out Refinance'

A mortgage refinancing transaction in which the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to extract equity from the borrower's home. A cash-out refinance is an alternative to a home equity loan.

INVESTOPEDIA EXPLAINS 'Cash-Out Refinance'

Cash-out refinances are a popular way for borrowers to access the equity in their homes to pay down consumer debt or make additional purchases. Borrowers need to make a risk-based assessment of whether extracting equity from a home is economical. Borrowers also need to be aware that refinancing a mortgage has costs, including the fact that the lender may charge a higher interest rate on a cash-out refinance than a rate-and-term refinance.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Refi Bubble

    A period during which old debt obligations are being replaced ...
  3. Lien

    The legal right of a creditor to sell the collateral property ...
  4. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  5. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  6. Mortgage Recast

    A feature in some types of mortgages where the remaining scheduled ...
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your ...

  2. Personal Finance

    Understanding Your Mortgage

  3. Options & Futures

    Make A Risk-Based Mortgage Decision

  4. Options & Futures

    Should You Refinance Your Mortgage When ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center