What you need to know about a cash out refinance
A cash out refinance is a way to take equity out of your property by taking on a larger loan than your current mortgage. The way it works is that you get a new mortgage for a larger amount than you owe, and then get a check for the excess amount, minus the fees.
During the refinance process, you can elect to borrow more than your existing loan and closing costs. Say that your current loan is $200,000 and closing costs are $4,000. You can pay the closing costs out of your pocket but most borrowers roll closing costs into the loan amount.
A cash out refinance might be $224,000, paying off the existing $200,000 loan, $4,000 in closing costs and putting $20,000 cash in the pocket of the borrower. Additional restrictions apply to cash out loans, so make sure you talk to a loan officer and understand the guidelines.
Taking out cash might be a secondary priority when thinking about refinancing your loan due to the closing costs involved. If you only want to tap into your equity for extra funds, you can also consider an equity loan from your bank instead.