A cash-out refinance can lower your monthly mortgage payment if current rates have dropped to a point where the lower rate offsets borrowing more than you currently owe. For example, maybe you borrowed $250,000 at a 30-year fixed rate of 5% several years ago, and your current loan balance is only $200,000 with a monthly payment of $1,456.98.
If current 30-year fixed rates have dropped to 3% and you want to borrow an extra $25,000 to make some home improvements, your new monthly payment would only be $1,108.85. Despite tapping an extra $25,000 of equity, the lower rate and loan amount compared to your existing mortgage saves you $348.13 per month.