Cash from equity without giving up a good first mortgage: second lien or cash-out refinance
Route 3: a cash-out refinance
The short version
A cash-out refinance pays off your first mortgage with a larger new one and gives you the difference. You get one loan and one payment, but the new rate applies to the whole balance, not just the cash, and you pay full closing costs. It tends to make sense when your current rate is near today's quotes or when the cash needed is large.
Last reviewed against the primary sources listed below.
Before you choose it
- Compare total closing costs with a second lien's.
- Check the loan-to-value limit for cash-out loans.
- Remember the term may restart.
Lien questions
Why can a cash-out refinance cost more than its rate suggests?
Because the new rate applies to your entire balance, including the part you already owed at a lower rate.