Understanding Cash-Out Refinancing: Is It Right for You?

A cash-out refinance can be a smart way to access the equity in your home, providing funds for big expenses, debt consolidation, or long-term goals. But how does it actually work, and how does it compare to options like a traditional refinance or a home equity line of credit (HELOC)? Teresa Joseph, VP, Residential Lending Manager at Croghan Colonial Bank, explains.

What Is a Cash-Out Refinance?

“A cash-out refinance replaces your current mortgage with a larger one, and you receive the difference in cash at closing,” says Teresa. “It’s a great option if you’ve built up equity and want to put it to work.”

Unlike a traditional refinance, which simply adjusts your rate or term, a cash-out refinance gives you direct access to cash. And unlike a HELOC—which is a line of credit with a variable rate—cash-out refinancing offers fixed terms and a single, predictable monthly payment.

Why Consider It?

• Access to a large lump sum of money
• Lower interest rates than many credit cards or personal loans
• Great for debt consolidation, home improvements, or other major needs
• Simplifies your finances with one monthly payment

Who Qualifies?

To be eligible, you typically need:

• Over 20% equity in your home
• A credit score of 620 or higher
• A debt-to-income ratio of 45% or less
• A new home appraisal and verified income

“Your home equity is a powerful tool,” Teresa adds. “We help you understand how to use it wisely—without putting your long-term goals at risk.”

Let’s Talk Strategy

Cash-out refinance rates can be slightly higher than no-cash-out refinance rates, but may still be lower than other financing options, depending on your credit and loan structure. “Every situation is unique,” says Teresa. “That’s why it’s so important to work with someone who takes the time to understand your needs.”

At Croghan, our Mortgage Experts are here to help you explore your options and decide what’s best for you—whether that’s a cash-out refinance, HELOC, or something else entirely.