Cash-Out Refinance Loans
Turn your home equity into cash with a cash-out refinance loan. Homeowners with sufficient equity can access funds for major expenses while potentially securing better interest rates than other financing options.
- Unlock your home equity
- Enjoy competitive interest rates
- Use funds for virtually any purpose
Benefits
Benefits of a Cash-Out Refinance
Access large sums:
Tap into your home’s equity and access a large lump sum of cash. You can use the funds for virtually anything.
Lower interest rates:
Cash-out refinance loans generally offer more favorable rates than other unsecured financing options like personal loans or credit cards.
Potential tax advantages:
Interest paid on mortgage debt used for home improvements may be tax-deductible. This effectively reduces your overall borrowing costs when you use funds for qualifying renovations.
Simplified finances:
Replace high-interest debt payments with one predictable monthly mortgage payment at a potentially lower rate. This consolidation can reduce financial stress and improve your monthly cash flow.
Improved home value:
Using funds for strategic renovations can increase your property’s market value beyond the cost of improvements. Leverage your existing equity to create additional equity.
How it Works
What Is a Cash-Out Refinance Loan & How Does It Work?
A cash-out refinance replaces your first home loan with a new, larger mortgage. You receive the difference between your new loan amount and your current mortgage balance as cash. This differs from a standard rate-and-term refinance, where you simply adjust your interest rate or loan term without taking money out.
The mechanics are simple: when you refinance and cash out your equity, your lender pays off your current mortgage and creates a new one with different terms. Your home serves as collateral for the loan, which is why cash-out refinance rates tend to be lower than unsecured borrowing options like personal loans and credit cards.
Key Features of Cash-Out Refinance Loans
- Exchange home equity for cash
- Borrow up to 80% of your home’s value
- Receive a lump sum at closing
- Potential to adjust your rate or loan term
- Flexible use of funds
Loan Options
Cash-Out Refinance Loan Types We Offer
A conventional cash-out refinance replaces your current mortgage with a larger one and allows you to pocket the difference.
Enjoy competitive rates, high LTV limits, and no PMI requirements with a VA cash-out refinance. VA cash-out refinance loans are available to qualifying veterans, even if they don’t currently have a VA loan.
This program offers more flexible credit guidelines and competitive interest rates. FHA cash-out refinance loans are available to both those with FHA loans and non-FHA borrowers.
Use a DSCR cash-out refinance to tap into the equity of your investment property and get cash to make improvements, expand your portfolio, or fund big expenses. Qualify using rental income rather than tax returns.
Qualify for a bank statement cash-out refinance loan using 12-24 months of bank statements as proof of income rather than tax returns or pay stubs.
Calculators
Cash-Out Refinance Calculators
Use these tools to estimate your DSCR for a new purchase or refinance.
Cash-Out Refinance Calculator
Get a snapshot of what a cash-out refinance mortgage could look like for you. Estimate your max cash-out amount, new monthly payment, and new loan balance.
Debt Consolidation Calculator
See how much you could save with a debt consolidation loan.
Home Value Estimator
Get an estimate of your home’s value to better understand how much you could potentially borrow with a cash-out refinance loan.
FAQ
Frequently Asked Questions
Homeowners choose cash-out refinance loans for numerous practical reasons, including:
- Debt consolidation: Combine high-interest debts into one lower-interest mortgage payment to potentially save thousands in interest charges over time.
- Funding home improvements/renovations: Improve your living space with renovations that can increase your property’s value and enhance your quality of life.
- Financing big purchases: Fund significant expenses like medical procedures, weddings, college, or other large costs at competitive interest rates.
- Covering business expenses: Invest in your business or startup using your home’s equity as relatively low-cost capital compared to commercial loans or credit cards.
- Down payment for another home/investment property: Access money for stock market investments, cryptocurrency, rental property purchases, or other wealth-building strategies when timing matters.
Most conventional lenders cap cash-out refinance loans at 80% of your home’s appraised value. This maximum loan-to-value (LTV) ratio helps ensure you maintain a meaningful ownership stake in your property.
For example, if your home is worth $350,000 and your remaining mortgage balance is $160,000, your maximum new loan would be $280,000 (80% of $350,000). After paying off the existing $160,000 mortgage, you could receive up to $120,000 in cash, minus closing costs.
Your borrowing power depends on several factors. Lenders evaluate your credit score, income stability, existing debt obligations, and property value to determine how much you qualify for. Most conventional cash-out refinance loans require a minimum credit score of 620, though requirements vary by lender and cash-out refi type.
Potential downsides of a cash-out refinance are:
- Higher closing costs: Expect to pay between 2-5% of the total loan amount in fees and closing costs, which reduces your net cash.
- Foreclosure risk: Your home secures the loan, meaning you could lose your property if you fall behind on payments.
- Extended debt timeline: Refinancing often resets your loan term, which means you’ll take longer to pay off your home. To avoid this, you’ll want to ask your lender if they provide custom loan terms. For example, if you are 5 years into your 30-year fixed loan and don’t want to start over, see if a 25-year term is offered.
- Reduced equity: Taking cash from your home’s value decreases your ownership percentage, which could be problematic if you choose to sell or property values decline.
- Potential for a higher rate: You may be giving up an interest rate that is lower than the current prevailing market rate in order to pull cash out of the property, which may or may not make sense given your circumstances.
If a cash-out refinance doesn’t align with your needs, there are several alternatives you can consider, such as:
- Home equity loan: Borrow a fixed amount against your equity with a consistent interest rate and payment schedule while keeping your original mortgage intact. A home equity loan is a second mortgage that provides stability with predictable monthly payments. Many homeowners prefer this structure when they need a specific amount for a one-time expense.
- Home equity line of credit: Gain flexible access to funds as needed during a draw period, with variable interest rates applied only to the amount you use. The revolving line of credit structure allows you to borrow, repay, and borrow again during the draw period. This flexibility makes HELOCs ideal for ongoing projects with uncertain costs or as an emergency fund backup. Compare cash-out refinance vs HELOC to determine which option better suits your specific financial situation.
- Reverse mortgage: Convert home equity into income for homeowners 62 and older without monthly payments while continuing to live in your home. The loan becomes due only when you sell the home, permanently move out, or pass away. This option works well for seniors with significant home equity who need to supplement retirement income or cover healthcare expenses without the burden of monthly payments.
- Sell your home: If a cash-out refinance or a second mortgage doesn’t make financial sense then you may want to consider downsizing if you need cash without taking on additional payments.