Define Cashout Refinance

[Craig Price]

Can someone define what Cashout refinance is and give an example? I'm sorry if this is basic knowledge but I'm new to all of this and want to make sure I understand this strategy.

[Matt Devincenzo]

Any refinance that is made that delivers more cash than required to pay off the underlying debts currently on the property. So if you have a free and clear house you want to get a loan on....cash out refi. If you wait for years until it appreciates and pull out that equity....cash out refi.

It just differentiates it from a rate and term refi. The purpose there is to adjust the loan terms whether it be because interest rates are lower than your old loan, or you want to lower your payment by extending the term back out to 30 years or....

A cash out refi will be a slightly higher interest rate than a rate and term refi, and the underwriting for it may be just slightly more stringent otherwise it works the same way.