Cash Out Mortgages
A Cash Out Refinance is not a Home Equity loan, but acts very similar. You are still borrowing against the equity in your house, but your old loan is replaced with a new loan that of a greater amount. For instance, if your house is worth $300,000 and your current mortgage is $200,000, than your equity is $100,000. You could trade your old mortgage for a new one of $250,000, and use the extra $50,000 for a remodeling or renovation project, or to consolidate bills by paying off your high interest credit cards.
One advantage of Cash Out program is that often you are able to take advantage of considerable lower rates. The down side is that refinancing often costs more money in application fees and closing costs then a Home Equity Loan.
A Limited Cash Out Mortgage, also known as a rate and term refinance, is a program that allows you to borrow against the equity of your house to pay for all of the closing costs. In essence, these costs are attached to your new loan. So, it would not make sense to refinance if the current market rates are higher than the rate you have on your current mortgage. But, if the rates are significantly lower, then you might be able to refinance, end up with lower monthly payments, and receive a lump sum of money at closing to do as you wish.