If you have more than 20% equity in your home, you may be eligible for a cash out refinance. A cash out refinance involves borrowing money against the value of your home by obtaining a new, refinanced mortgage loan. You can use cash out for a variety of purposes including debt consolidation, education expenses, home improvements, investments and more.
How It Works:
Let’s say your home is appraised at $200,000 and the current outstanding mortgage balance is $120,000. Assuming a maximum loan-to-value of 80%, you would be eligible to get a new mortgage up to $160,000, which would pay off the original mortgage and provide you up to $40,000 in cash. As with any mortgage, closing costs need to be considered and could be covered by some of the cash proceeds.