Refinancing 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 purposes. Such as home improvement, college tuition, family vacation, etc.
Other reasons people use a cash out refinance is to use the equity in their home to invest in real estate, or start their own business. You can now get a cash out refinance for no doc loans or a no doc mortgage program.
Cash out refinances are very good tools when used for the right reasons. It is not wise to do cash out refinancing 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 consider 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 referred to as a second mortgage.
For instance, if you have acquired $50,000.00 worth of equity in your home, you can borrow what you need of that equity, without your first mortgage being affected.
The cash out refinance and the home equity loan are very similar and serve almost the same purpose, your situation should determine the right choice for you. If you have the credit you can apply for no doc mortgages or a mortgage no doc program.
As always, I want to leave you with this reminder. Do your homework, educate yourself, and shop around for the best deal.