A cash-out refinance can be a good option for borrowers who have built up equity in their home and who want to use that equity to pay down other debts, make home improvements, or for any other purpose. In a cash-out refinance, the borrower takes out a new loan that is of a larger amount than their current mortgage and uses the extra funds to pay off other debts, make home improvements, or for any other purpose.
There are a few things to keep in mind before considering a cash-out refinance:
• The new loan will have a higher interest rate than the existing mortgage.
• The borrower will have to pay closing costs on the new loan.
• The borrower will have to pay points if they choose to refinance with a new lender.
• The existing mortgage must have equity in order to qualify for a cash-out refinance.
• The borrower must have a good credit history to qualify for a cash-out refinance.