Cash Out Refinance Calculator
Use our Cash Out Refinance Calculator to determine how much cash you can take out of your home when you refinance your mortgage. This calculator uses your estimated property value, current mortgage balance and new loan amount determine to if you have enough equity in your home to take money out. Compare numerous financing options with our calculator to find the one that works best for you.
Watch our Cash-Out Refinance Calculator "How To" videoHow Our Cash Out Refinance Calculator Works
How much equity you can access when you refinance your mortgage depends on many factors including your current loan balance and the value of your home. Our calculator uses these and other inputs to enable you to understand the financial impact of a cash out refinance:
Estimated Value of Property. This is the estimated fair market value of the property being refinanced. In order to take cash out of your home you must have sufficient homeowners equity, which is the difference between the value of your property and any mortgages against the property. For example, if your property is valued at $100,000 and your mortgage balance is $60,000, then you have $40,000 in equity.
Outstanding Loan Balance. This is your current mortgage balance. You are required to completely payoff any loans on a property when you do a cash out refinance. If your outstanding mortgage amount is too high you may not be able to take out much money when you refinance.
Amount of New Mortgage. This is your new mortgage including the proceeds you want to take out. To do a cash out refinance, your new loan amount must be more than your outstanding loan balance. It is important to confirm your property value to make sure that you have enough equity to do a cash out refinance.
New Mortgage Rate. This is the interest rate for your new mortgage. The interest rate for a cash out refinance is usually higher than for a regular rate and term refinance so this is an important input to consider.
In addition to the important outputs below our calculator also factors in mortgage length, loan program and closing costs so you understand how these inputs impact your mortgage proceeds, new monthly payment and potential savings.
Net Cash Out From Refinancing. This is the amount of proceeds you receive after your refinance closes. Your cash proceeds equals your new mortgage amount less your current loan balance and closing costs. For example if you take out a new $200,000 mortgage with $3,000 in closing costs and payoff an existing $150,000 loan, then your net proceeds are $47,000 ($200,000 - $150,000 - $3,000 = $47,000). The lower your closing costs, the more proceeds you receive from a cash out refinance. You may also be able to finance your closing costs with your new mortgage.
Minimum Required Property Value to Qualify for Mortgage. This is the estimated property value required to qualify for the mortgage based on the maximum loan-to-value (LTV) ratio applied by the lender. Your property must be valued highly enough to provide sufficient collateral for the loan amount you want. For example, if you want a $80,000 mortgage and your property is valued at $100,000, then your LTV ratio is 80%, which should enable you to qualify for the refinance. If your property is valued at only $85,000, however, then your LTV ratio is 94% which exceeds the maximum ratio used by most lenders. Our calculator determines the minimum required property value based on your target mortgage amount and closing costs. You can use this information to assess if the value of your home is high enough to access the amount of cash you want.
Our Cash Out Refinance Calculator also shows you how long it takes to breakeven on your non-recurring closing costs if you are able to lower your monthly payment when you refinance. While accessing the equity in your home is typically the primary goal of cash out refinance, lowering your mortgage payment can provide an extra financial incentive.
What Borrowers Should Know About a Cash Out Refinance
Make Sure You Have Sufficient Equity in Your Property
You must have enough equity in your property to take cash out of it. Equity is the difference between the value of your property and the amount of debt on a property. For example, if your property value is $100,000 and your mortgage balance is $70,000 then you have $30,000 in home equity: $100,000 (property value) - $70,000 (mortgage balance) = $30,000 (home equity). Most lenders apply a maximum loan-value (LTV) ratio of 80% for a cash out refinance and some lenders apply a lower LTV ratio of 60% - 70% for larger mortgage amounts (jumbo loans) or if you are taking a significant amount of money out of your home. Before you apply for a cash out refinance make sure that your property is valued high enough to support the mortgage amount you are seeking. If the value of your property has declined or you have a significant mortgage balance you may not have sufficient equity to do a cash out refinance. Our Cash Out Refinance Calculator shows you the minimum property value required to qualify for the refinance.
Your Interest Rate May Be Higher
Lenders typically charge a higher interest rate for a cash out refinance as compared to a regular mortgage refinance. In some cases your interest rate may be .250% to .750% higher for a cash out refinance depending on your credit score, loan-to-value (LTV) ratio and other factors. Lenders charge a higher interest rate because the risk for a cash out refinance is generally perceived to be higher than other mortgages. Borrowers should be sure to shop multiple lenders to find the best terms for a cash out refinance. Use our calculator to understand your mortgage rate impacts your new loan payment and potential monthly savings compared to your current payment.
Consider All Your Home Financing Options
While a cash out refinance offers significant financial benefits borrowers should consider other home financing options as well. In some cases borrowers are better off using a separate loan such as a home equity loan or home equity line of credit (HELOC) to access the equity in their home. Additionally, if borrowers are using the proceeds from a cash out refinance for expenditures such as college tuition it may make more sense to take out a separate college tuition loan. A second mortgage or separate loan may charge a lower interest rate than a cash out refinance or have a shorter term, which reduces your total interest expense over the life of your mortgage. Unless you are able to reduce your interest rate or shorten your mortgage term with a cash out refinance then not refinancing and using a second loan may save you money in the long run.
How Borrowers Can Use Proceeds from a Cash Out Refinance
Most lenders do not restrict how borrowers use proceeds from a cash out refinance which means you can use the money for any number of purposes such as home renovations or remodeling, college tuition, buying a second home, investments or traveling. Because you can use your loan proceeds however you want, a cash out refinance provides borrowers with significant financial flexibility. With our calculator you can determine your total proceeds, after closing costs. How you spend the money is up to you.
Multiple Cash Out Refinance Programs are Available to Borrowers
While many borrowers select conventional cash out refinance programs there are additional options available to borrowers. The FHA cash our refinance program offers more flexible qualification guidelines including a higher maximum loan-to-value (LTV) ratio of 85% and lower required credit score. The higher LTV ratio enables you to access more equity in your home while the lower credit score requirement enables credit-challenged borrowers to qualify for a cash out refinance. The downside of an FHA loan is that you are required to pay an upfront and ongoing mortgage insurance premium (FHA MIP), which are additional costs for borrowers. Conventional cash out refinance programs usually do not require borrowers to pay mortgage insurance (PMI).
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More FREEandCLEAR Mortgage Resources
Cash Out Refinance Overview
Review our comprehensive explanation of how a cash out refinance works including key borrower considerations and an informative example of a cash out refinance
Comparing a Cash Out Refinance to a Separate Loan
Borrowers should compare a cash out refinance to a separate loan such as a home equity loan or line of credit. In some cases it makes more financial sense to obtain a second loan or mortgage instead of doing a cash out refinance
Mortgage Refinance Rates
Compare mortgage refinance rates for leading lenders near you. Comparing mortgage proposals from multiple lenders is the best way to save money when you refinance
Mortgage Expert
Got mortgage questions? We love answering them. Submit your mortgage questions and receive an informative response within 24 hours
Best Options for Taking Cash Out of Your Home
Compare the best ways to access the equity in your home -- including a cash out refinance, home equity loan, HELOC or reverse mortgage -- to understand the financing option that is right for you
FHA Cash Out Refinance Guide
Review program eligibility guidelines and qualification requirements for the FHA Cash Out Refinance program and understand why this could be the right financing option for people with limited homeowners equity and imperfect credit
Sources
"Understanding Cash-Out Refinances." My Home by Freddie Mac. Freddie Mac, 2019. Web.