Cash-Out Refinance
A cash-out refinance replaces an existing loan with a larger one, returning the difference to the owner as cash. It converts accumulated equity — from appreciation, loan paydown, or NOI growth — into liquid capital without selling the property or triggering capital gains tax on the proceeds.
Lenders typically apply somewhat stricter leverage limits to cash-out loans and scrutinize the use of proceeds. Seasoning requirements — a minimum ownership period before cash-out — are common after recent acquisitions or value-add projects.
Cash-out proceeds are loan principal, not income, so they arrive tax-deferred; the tradeoff is higher debt service against the same NOI.