Cash-Out Refinance Calculator (2024)

Cash-out refinancing can be a good option for homeowners looking to tap into their home equity. With this calculator, you can see what your monthly payment and overall cost would look like with a cash-out refinance.

How To Use This Cash-Out Refinance Calculator

To use this cash-out refinance calculator, you’ll need to gather some basic information, including:

• Your home’s current value
• How much you still owe on your mortgage
• How much you’d like to borrow
• The loan term you’d like (usually 10 to 30 years)

You’ll also have the option to input some additional factors that can impact your overall cost, including:

• Interest rate
• Estimated property taxes
• Home insurance costs
• Homeowners association (HOA) fees
• Private mortgage insurance (PMI) fees

Afterward, you’ll be given an estimate of how much you might qualify for with a cash-out refinance as well as what you can expect to pay per month and overall.

What Is a Cash-Out Refinance?

A cash-out refinance is a refinancing option that allows you to pay off your existing mortgage with a larger loan. You’ll receive the difference as a lump sum to use how you’d like (minus any closing costs and fees). Repayment terms typically range up to 30 years.

Depending on your credit, you might qualify for a lower interest rate than what you’re currently paying with a cash-out refinance, which is helpful as you’ll be making payments on a bigger loan.

However, keep in mind that because lenders consider cash-out refinances to be riskier compared to standard rate-and-term refinances, they tend to come with somewhat higher interest rates in comparison. Your rate will also vary depending on whether you opt for a conventional loan or a loan backed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA).

Also, remember that just like with any mortgage product, your home will be collateral for the cash-out refinance. This means you risk foreclosure if you don’t keep up with your payments.

How Does a Cash-Out Refinance Work?

With a cash-out refinance, you’ll pay off your existing mortgage with a new, larger loan and pocket the difference. Mortgage lenders typically allow you to borrow up to 80% of your home’s value with a conventional cash-out refinance, meaning you must maintain at least 20% equity in your home. These limits differ for government-backed loans: up to 85% for an FHA cash-out refinance and up to 100% for a VA cash-out refinance.

Cash-Out Refinance Costs and Requirements

Like with your first mortgage, you’ll pay closing costs on a cash-out refinance. These typically range from 2% to 6% of the loan amount. These costs can include fees such as an origination fee, appraisal fee, credit check fee and more.

You’ll also have to meet certain requirements to qualify for a cash-out refinance. These can vary by lender, but the following guidelines are considered standard by many institutions:

• Credit score of at least 620
• At least 20% equity in the property
• Debt-to-income (DTI) ratio of 50% or less

Is a Cash-Out Refinance a Good Idea?

A cash-out refinance can be a good way to access money for home renovations, consolidate debt or pay for a major purchase. Not only do cash-out refinances come with lower interest rates compared to other financing options—such as personal loans and credit cards—repayment can be spread out over a longer period, reducing the monthly payment amount.

However, they aren’t for everyone. If you struggle to make payments already, adding to your mortgage could prove to be too much of a burden. Extending your term also means paying more in interest over the life of the loan, even if you managed to score a lower interest rate. And if you think housing values in your area might fall, that is another reason to reconsider a cash-out refinance.

Can You Get a Cash-Out Refinance With Bad Credit?

It’ll depend on the lender, but most require a credit score of at least 620 for a cash-out refinance.

There are exceptions, though. For instance, Rocket Mortgage says it will approve VA cash-out refinances for those with credit scores as low as 580 if they’re leaving at least 10% equity in their property.

If your credit is not good enough to qualify for a cash-out refinance right now, focus on paying down your debt and making on-time payments to boost your score.

Cash-Out Refinance Rates

Cash-out refinance rates can be slightly higher than regular refinance rates, but many institutions currently offer competitive terms.

As of September 2023, the average rate for a cash-out refinance ranges between 6% and 8%, but you may be able to score a better deal by comparing options from several different lenders.

Cash-Out Refinance vs. HELOC vs. Home Equity Loan

Cash-out refinancing isn’t the only way to tap into your home equity. You could also consider a home equity line of credit (HELOC) or a home equity loan. Unlike a cash-out refinance that replaces your first mortgage with a new loan, these products are technically second mortgages that you’ll pay in addition to your existing loan.

Here’s how HELOCs and home equity loans work to help you compare them to a cash-out refinance:

• HELOC.This is a type of revolving credit that lets you repeatedly draw from and pay off a credit line—similar to a credit card. You’ll typically have five to 10 years to access cash with a HELOC while paying only the interest, then an additional 10 to 20 years to repay what you borrowed, plus interest. HELOCs usually come with variable interest rates that can fluctuate with market conditions. Note that these rates are usually higher than what you’d get with a cash-out refinance.
• Home equity loan.Unlike a HELOC, a home equity loan is a fixed-rate loan that provides you with a lump sum to use how you wish. While home equity loan interest rates tend to be higher than what you’d get with a HELOC, they are generally lower than what you’d pay on a personal loan.

Keep in mind that like a cash-out refinance, a HELOC or home equity loan will be secured by your home, which means you risk foreclosure if you can’t make your payments.

Forbes Advisor Mortgage Expert Maryalene LaPonsie contributed to this article.

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