Cash out refinancing

"Cash out refinancing" occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses.
Strictly speaking, all refinancing of debt is "cash-out," when funds retrieved are utilized for anything other than repaying an existing loan.
In the case of common usage of the term, cash out refinancing refers to when equity is liquidated from a property above and beyond sum of the payoff of existing loans held in lien on the property, loan fees, costs associated with the loan, taxes, insurance, tax reserves, insurance reserves, and in the past any other non-lien debt held in the name of the owner being paid by loan proceeds.

Example of "Cash Out Refinancing"
A homeowner who owes $80,000 on a home valued at $200,000 has $120,000 in equity. That equity can be liquidated with a cash-out refinance loan providing the loan is larger than $80,000.
The total amount of equity that can be withdrawn with a cash-out refinance is dependent on the mortgage lender, the cash-out refinance program, and other relative factors, such as the value of the home.
How does a cash out refinance differ from a home equity loan?
A home equity loan is a separate loan on top of your first mortgage.
A cash-out refinance is a replacement of your first mortgage.
The interest rates on a cash-out refinancing are usually, but not always, lower than the interest rate on a home equity loan.
You pay closing costs when you refinance your mortgage.
Generally, you don’t pay closing costs for a home equity loan.
Closing costs can amount to hundreds or thousands of dollars

Cash out refinance is a good option

Cash out refinance
A mortgage refinance happens when the homeowner gets a new loan to replace the current mortgage, often to get a lower interest rate. A cash-out refinance happens when the borrower refinances for more than the amount owed. The borrower takes the difference in cash. Also called a cash out refi

Cash-out refinancing explained
With cash-out refinancing, you refinance your mortgage for more than you currently owe, then pocket the difference.
Here's an example: Let's say you still owe $80,000 on a $150,000 house, and you want a lower interest rate. You also want $20,000 cash, maybe to spend on your child's first semester at Princeton. You can refinance the mortgage for $100,000. Ideally, you get a better rate on the $80,000 that you owe on the house and you get a check for $20,000 to spend as you wish.
Cash-out refinancing differs from a home equity loan in several ways:
•A home equity loan is a separate loan on top of your first mortgage.
•A cash-out refinance is a replacement of your first mortgage.
•The interest rates on a cash-out refinancing are usually, but not always, lower than the interest rate on a home equity loan.
•You pay closing costs when you refinance your mortgage.
•Generally, you don't pay closing costs for a home equity loan.
•Closing costs can amount to hundreds or thousands of dollars
 Is cash-out refinancing right for me?
So, if you want to extract a chunk o' change from your three-bedroom piggy bank, how do you decide whether a cash-out refi is right for you?
It depends on how much you would save each month and what you want to spend the money on

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