(1.) Taking out of a new mortgage on an amount that exceeds the existing balance on the current mortgage in order to refinance the original mortgage and receive additional cash for outside use.

(2.) The purpose of a cash-out refinance is to extract equity from the borrower's home. A cash-out refinance is an alternative to a home equity loan.

(3.) Cash-out refinances are a popular way for borrowers to access the equity in their homes to pay down consumer debt or make additional purchases.

(4.) The lender may charge a higher interest rate on a cash-out refinance than a rate-and-term refinance.

Bankapedia's Take

When is the last time the term "cash out refinance" was popular, sodoku eas the biggest game in the country, Dave Chappelle was still on TV, Mickey Rourke was still washed up, but times have changed. Nowadays, people are lucky to have enoughrquity in their homes to get away with a good ol' rate and term refi.

If you do have the equity to take cash out of your house, you'll want to consider a few things. 1) If your mortgage is relatively mature (i.e.10 yrs into a 30 yr mortgage) do you really want to reset the things and have your mortgage payment end up being 85% interest as it is at the beginning of a loan. 2) It may be best to consider a Home Equity Line of Credit. If you really don't need all the immediately need all the cash from a cash out refinance, then why the pay the interest on it. You can guarantee the interest rate you'll be paying on a C/O refi will almost certainly be higher than what you would make on a simple savings account or a CD. So, if it doesnt need to borrowed, don't put yourself into a negative arbitrage situation. Get a HELOC and only take money out as needed. 

One thing you will want to be especially aware of, is a loan officer will almost always steer you towards a refinance vs. a HELOC. Why? Simple the large the loan amount the more commission the Loan Agent makes, and you C/O refi will typically net a loan officer 2 to 3 times the commission of a HELOC. If they tell it like it is and tell you a HELOC is better, let them marry your daughter, becuase they're a keeper.