By taking the a cash out refinance option, you will be refinancing your current mortgage for more than you currently owe on the mortgage loan, and the difference is the cash you will take home at the signing.
Example: If you owe $90,000 on a $200,000 home, and know that you can get a better interest rate. You also know you want say $30,000 cash, to invest in a business, or put away for a college fund. You would refinance the mortgage for $120,000. You should ideally receive a better interest rate on the new mortgage, and the $30,000 cash you needed.
-M Petrone
Refinancing FAQ & Advice
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