 TITLE: What Is a Cash-Out Refinance? CONTENT: How Does a Cash-Out Refinance Work?\n-----------------------------------\nFor the most part, a cash-out refinance works similarly to a traditional mortgage refinance loan. Both processes replace your existing mortgage with a new one that may come with a new interest rate, monthly payment and more.\nThe primary difference is that a cash-out refinance loan will be larger than the remaining balance on your mortgage—allowing you to pocket the difference in cash.\nHere's how the cash-out refinance process might work. Let's say you have a $250,000 mortgage balance on a home worth $400,000. You need $20,000 to cover the cost of some home renovations, so with a cash-out refinance loan, you replace your $250,000 loan with a $270,000 loan and receive the $20,000 difference in cash.\nYou can use your funds from a cash-out refinance for just about anything you want. Some of the more common reasons include home improvements, debt consolidation and other major expenses.\nThat said, there's no guarantee you'll get the amount you want. Many lenders allow you to borrow up to 80% of your home's value. So if you have a $400,000 home, the maximum amount you could borrow with a cash-out refinance is $320,000, but you may be limited by other factors including how much equity you have in your home. END