You replace your existing mortgage with a bigger one. The new loan pays off the old balance, and the extra borrowed against your equity is paid to you at closing, to use for repairs, debts or anything else.
Why it matters
It turns equity into cash in one step and leaves you with a single mortgage payment. It also resets your loan, so the rate and term of the old mortgage are gone, which can be a cost as well as a benefit.
Where you meet it
It is the main alternative to a HELOC. Our guide cash out refinance vs HELOC compares the two side by side.
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