How does a cash-out refinance on land work?

Question

Turnrow Capital · Accepted Answer

A cash-out refinance replaces your existing land loan with a larger one, and you keep the difference in cash at closing. On land appraised at $1,000,000 with a $300,000 payoff, a 70% LTV loan of $700,000 clears the old note and puts roughly $400,000 in your account, less closing costs.

The sequence: application, appraisal, title search, payoff letter from your current lender, then closing. The new lender wires the payoff directly to the old lender, records a new first lien, and disburses the balance to you. From the borrower's side it looks like one signing appointment; behind it is lien priority work your title company handles.

Proceeds must be business-purpose for a no-doc structure to apply: acquiring adjacent ground, equipment, inputs, construction, partnership buyouts, settling an estate, or bridging a purchase elsewhere. Lenders will ask what the cash is for — answer plainly, because the answer determines which regulatory box the loan lives in.

The discipline question matters more than the mechanics. Cash-out converts silent equity into a note with a maturity date. Have a specific use and a specific exit for the new, larger balance before you pull equity — 'dry powder' is not a plan a balloon date respects.