What Is a Cash Out Refinance Loan?

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A cash out refinance loan can be done on a first mortgage or second mortgage basis. Find out how to use a cash out refinance loan to make home improvements with help from a financial specialist in this free video on loans and money management.

Part of the Video Series: Loan Information
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Video Transcript

Hi, this is Matt McKillen with Innovative Financial Group. The question posed today is: What is a cash out refinance loan? Well, basically, there's two types of mortgages that you can acquire. There's either a purchase money loan or a cash out refinance loan. A purchase loan is generally the loan that you use when you close on your house. There's no cash coming out of the transaction -- you're actually bringing money to the closing table to purchase your home. A cash out refinance loan can be done either on a first mortgage or a second mortgage basis. If, let's say, you refinanced the loan that you took when you bought your home five years later and you pull out some money for home improvements or you pull out some money to consolidate some debts, that's considered a cash out refinance. If you take a second mortgage, whether it be a closed-end loan or a home equity line of credit, that is completely a cash out refinance loan. So that's really the difference. It's any type of loan that's taken after you've purchased your home, whether it be a year, two years, 10 years. It really doesn't matter, but that's what determines if it's a cash out refinance. Again, my name is Matt McKillen. I'm with Innovative Financial Group.

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