How does a cash-out refinance work?

A cash-out refinance replaces your existing mortgage with a larger one and hands you the difference in cash, tapping the equity you've built. If your home is worth $500,000 and you owe $300,000, you might refinance into a $380,000 loan and pocket roughly $80,000, minus closing costs. Lenders usually let you borrow up to about 80% of the value, and the new loan carries a new rate and term. It can fund renovations or consolidate higher-interest debt, but you're trading short-term cash for a bigger mortgage and possibly a higher rate than you have now. Run the numbers carefully – you're paying closing costs and stretching the balance back out. Compare it against a HELOC and model both at wealthserene.com/tools/refinance-analyzer before committing.