Refinancing your mortgage is to pay off your existing mortgage with another one at a lower rate.

A cash out refinance is refinancing your existing mortgage and borrowing some of your equity in a lump sum to use for other needs. Such as home improvement, college tuition, family vacation, a new car, etc.

Other reasons people use a cash out mortgage refinance is to use the equity in their existing home to invest in real estate, or start their own business.

Cash out refinances are very good tools when used for the right reasons. It is not wise to do a cash out refinance on your home if you are going to receive a higher interest rate than what you already have on your current mortgage.

If you have a really good rate on your current mortgage, it would be wise to leave it alone.

However, if you are looking to tap into the equity you have acquired in your home without touching your current mortgage, you may want to think about getting a Home Equity Loan.

With a home equity loan you can borrow the equity you have acquired without touching your first mortgage. The home equity loan is also known as a second mortgage.
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