 TITLE: Is a Cash-Out Refinance a Good Idea? CONTENT: A cash-out refinance is a loan that replaces your current mortgage with a new, larger mortgage—giving you the difference in cash. To get a cash-out refinance, you'll need to have equity in your home; in other words, your home will need to be worth more than you owe on it.\nFor example, if your home is worth $300,000 and your current mortgage balance is $200,000, you have $100,000 in home equity. Because lenders don't typically allow you to borrow all that equity (equity loans are usually limited to about 80% of the home's value), you may be able to get a cash-out refi for $225,000. From the new mortgage, $200,000 will go to pay off your existing debt, and you'll receive the other $25,000 in cash.\nCash-out refinances are often used to pay for home repairs and improvements, to refinance higher-rate debts or to pay for college. Unlike a home equity loan or HELOC, where you keep your current mortgage, you'll entirely replace your current mortgage with a cash-out refi.\nThis can be a particularly enticing option if interest rates have fallen, as you can benefit by lowering your interest rate on all your current mortgage debt (and thus pay less over the life of the loan). It also may provide a cheaper source of funding than an unsecured loan such as a personal loan. END