How to Refinance a Mortgage With a Cash Payout

Cash-out refinancing unlocks the home equity you've been sitting on.
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If you've built up equity in your home and you want to take some out to pay for a new roof or a new sports car, you'll want to get what the industry calls a cash-out mortgage. Unlike a home-equity loan, where you borrow against the equity, a cash-out mortgage is a completely new loan for the amount you still owe on the original mortgage, plus the cash you'd like to spend now.

Step 1

Contact your lender or mortgage broker and let them know you want to refinance with cash out. A mortgage broker can find you a low interest rate and possibly a no-fee mortgage, though not necessarily with your current lender.

Step 2

Fill out the mortgage application. State how much you owe on the home and how much you want to borrow.

Step 3

Submit the application along with other necessary documents, including proof of income, tax returns, or other financial data required by the lender. Remember, you're applying for a brand new mortgage, so you have to go through the same hoops you did the first time around.

Step 4

Prepare your home for an appraisal. Refinancing requires a new valuation on your home, so the bank can be sure it's worth the total amount you want to borrow now, including the current principal plus cash-out amount. The bank will put its appraiser in touch with you. Point out any repairs or improvements you've made on the property since the last appraisal, which will maximize the valuation.

Step 5

Wait for the mortgage approval. Your loan officer or broker will tell you how long a decision will take. You'll have to pay new closing costs in most cases, unless your financial institution waives them. Your loan officer will discuss options for receiving the cash payout.

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