What is a cash out refi?

[Kyle Spinale]

I'm not totally 100% sure what a cash out refinance is. 

I understand that it's a way to extract cash from property but how can it help you?

Could someone please explain what it is and how it can be helpful. If you have a personal experience please feel free to share. I'm new to this and I'd like to know more. 

[Darren Budahn]

@Kyle Spinale

Say you have a house that you bought for $150k.  Now after say 10 years you owe $100k on the house and it's current market value has gone up to $200k.  At this point, you could refinance the house because you have enough equity.  For instance, it's common for banks to lend 75% of the value of the house.  Therefore, a bank would now lend you 75% of $200k which is $150k.  Since you only owe $100k on the initial mortgage, the bank writes you a check for $50k.