Definition
Replacing your mortgage with a larger one and taking the difference in cash, converting home equity into money in hand. The new loan restarts the clock with its own rate, term, and closing costs.
Why it matters
It is often the cheapest large borrowing available to a homeowner, and also a way to trade an appreciating cushion for spending money. Equity spent no longer buffers a downturn or funds the next home.
Example
A homeowner owes $250,000 on a house worth $450,000. A cash-out refinance into a $320,000 loan hands them roughly $70,000 minus closing costs, in exchange for a larger payment and a reset term.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.