Mortgage glossary
Cash-out refinance
Definition: A cash-out refinance replaces an existing mortgage with a new, larger loan and pays the borrower the difference in cash, turning part of the home's equity into money at closing.
The new loan pays off the old one, covers closing costs, and the remainder goes to the borrower. The maximum loan amount depends on the loan type, the appraised value, and the borrower's credit and income.
In Texas, a cash-out refinance on a homestead is typically a Texas home equity loan under Section 50(a)(6) of the state constitution. These loans are generally limited to 80% of the home's value and come with waiting and timing rules, including limits on how often you can take one. Compare the new rate and costs against a HELOC before deciding.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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