 TITLE: What Is a Cash-Out Refinance? CONTENT: Drawbacks of a Cash-Out Refinance\n---------------------------------\nWhile doing a cash-out refinance can help you improve your financial situation, there are some potential pitfalls that can make it difficult to justify:\n*   **Collateral issues**: As cash-out refinancing uses your home's equity as collateral for the debt, you could risk losing your home to foreclosure if you struggle to make your new, higher mortgage payment.\n*   **Closing costs**: You can expect to pay between 2% and 6% of your new loan amount in closing costs, which can easily amount to several thousand dollars. The amount you'll pay to refinance will play a big role in determining whether a cash-out refinance is the smart move. Don't forget to compare the benefits with these costs to ensure it's a good fit for you.\n*   **New loan terms**: Your cash-out refinance loan may give you more or less time to repay the debt than your old mortgage did. If you opt for a longer term on your new loan, that likely means paying more interest in the long run.\n*   **Spending habits**: If you're thinking of using a cash-out refinance to consolidate credit card debt, you may be enabling poor spending habits to continue unless you have a plan to avoid racking up a new balance on your credit card accounts. END