On our parent site, Hurst Lending & Insurance, we have a popular blog series called “In 300 Words or Less”. In it, we explain common mortgage terminology in… you guessed it… 300 words or less.

Since this post was specifically about cash out refinancing, we thought we’d also publish it here. If you like this post, please visit HurstLending.com for more “300 Words or Less” explanations.

There are a number of different refinancing options available to homeowners. Some popular ones are: 15 and 30 year mortgage refinances, cash-in refinancing, short refinancing, and lastly, cash out refinancing. Cash Out Refinancing is a great way to access money you have tied up in your mortgage as equity.

One of the biggest advantages to owning your own home is creating “equity,” which we explained in this post about home equity. In short, equity is the dollar amount that you own of a house. As you pay your mortgage each month (and as your home appreciates in value), you increase the equity you’ve gained. Cash out financing can help you tap into that equity in order to reallocate money elsewhere.  It’s important to know that, in Texas, you can’t take out ALL the equity you’ve built up.  You must leave 20% equity in your mortgage. Click here to learn more about the laws pertaining to Texas Cash Out Refinancing.

Topping the list of uses of cash out refinancing is home improvement. Whether it’s redoing the kitchen or a bathroom, or finishing a basement, money from cash out refinancing can help you invest back into your home. As a result, your home’s value can go up and ideally you stand to make more when you sell. If you’re feeling investment savvy, the extra savings could also be put towards acquiring a rental property.