A cash-out refinance is a type of mortgage refinance that allows homeowners to convert their home equity into a lump sum of cash. It involves taking out a new mortgage that pays off the existing home loan and leaves the homeowner with a significant amount of money. The difference between what is owed on the old loan and what is borrowed is taken as a lump sum in cash. The cash can be used for various purposes, such as paying off credit cards, remodeling a home, covering college tuition, or consolidating debt.

Here are some key features of a cash-out refinance:

• The amount that can be borrowed is based on the amount of equity the homeowner has in their home.
• The interest rates on a cash-out refinance are usually, but not always, higher than those on a regular mortgage.
• A cash-out refinance may impact the homeowners mortgage interest deduction, which allows them to deduct the loan interest they paid over the year from their taxable income.
• A cash-out refinance replaces the current mortgage with a new, larger loan.
• The process for a cash-out refinance is similar to that of a regular refinance, but with a cash-out refinance, the homeowner also withdraws a portion of their homes equity in a lump sum.

Its important to note that a cash-out refinance involves taking on a larger mortgage, which means the monthly payments may be different, the interest rate may change, and the loan may take longer to pay off. Homeowners should carefully consider the pros and cons of a cash-out refinance before deciding if its the right option for them.