How does a cash-out refinance work?
A cash-out refinance replaces your mortgage with a larger one and pays you the difference. It converts equity into cash while increasing your loan balance, payment or term.
Refinancing · Written by Anil Aggarwal, Realtor® | Mortgage Loan Officer · Updated August 8, 2026
Because the balance grows, total interest usually rises even when the rate improves. Compare against alternatives such as a home equity line or loan.
Cash-out loans often price slightly higher than a rate-and-term refinance and have equity requirements set by program guidelines.
Model the new payment and the interest difference before deciding what the cash is worth to you.
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