eli5: What is cash-out refinancing and why did so many homeowners choose to do this during 2020-2021? Also, are there any hidden dangers in this type of refi that are less talked about?
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According to Google, it’s when you take out a New mortgage for more than you owe on your current mortgage, but less than your homes current value. You get the difference between New loan amount and the loan balance at closing…
The hidden danger I’d say would be that it’s not really free money… you’re still taking out a bigger loan you still have to pay back, it could just give you some cash on hand, and hopefully the refinance would be getting you a lower interest rate (which means the now bigger loan will take even longer to pay off)
All my 2 cents, I’m no expert
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