A cash out refinance is when the owner of a property takes out a new loan that replaces the old loan plus an additional amount that the borrower receives as a liquid amount. This cash can be used like any other cash to purchase or invest as they desire.

The cash out refinance is not the same as the standard refinance because the standard rate/term refinance the old loan is paid off and replaced with another loan with either a changed term such as going from a 30 year to a 15 year, a 15 year to a 30 year, to lower the interest rate, to move from a fixed interest rate to an adjustable to lower the payment, or from an adjustable to a fixed interest rate and get them into a safe and reliable monthly payment for the duration of the loan.

After the most recent housing and financial crisis, the economy was in the dumps. In order to stimulate the economy, they lowered interest rates. They kept lowering interest rates until they hit rock bottom and broke record lows. Because of this stimulation of the economy, you are likely to get a much lower rate at the date of this writing than before the financial crisis.

If we were to compare the interest rates on a home loan vs the interest rates of a credit card, or even a personal loan, the difference should be very apparent. Home loans are usually able to command a much lower interest rate than that of a credit card or a personal loan because they are secured by real property which means less risk associated for the lenders.

Some home owners have a bunch of untapped equity in their home. This equity can sometimes be put to work by using a cash out refinance to free up a significant amount of cash flow by consolidating debts. Sometimes it makes financial sense to trade high interest for low interest debt and possibly even pay the home off more quickly. If you are concerned about closing costs, most lenders are able to offer no cost options.

People also use cash out refinances, home equity loans and second mortgages because they need liquidity and or cash flow, or to make a home improvement such as adding a pool or solar panels. Rather than come out of pocket for what could be tens of thousands of dollars, they pull money from their equity instead. In any case, make sure you are taking your long term as well as short term goals into consideration before you commit to a loan program.

Find out which mortgage interest rates you qualify for today! https://www.emortgageconnect.com/cash-out-refinance/