Refinance and cash out

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Hey guys, 

Sometimes its the simplest concepts that lead to my overthinking and confusing myself. However, how does refinancing and taking cash out work?

Lets assume I purchase a property with a $400,000 loan (LTV of 80% for $500,000 property) then force appreciation so it was now worth $600,000. If I were to refinance, then how would it work? Would I receive a loan of $480,000 (80% LTV of $600,000), pay off the first mortgage and keep the difference? All while the the tenants are paying of the new mortgage?

Does the property repeat its underwriting process? 

Thank you for your explanations in advance