Cash out refinance calculator

Building equity is one of the most significant advantages of being a homeowner. As you pay down your mortgage and the value of your property increases over time, you accrue more equity (or ownership) in your home.

Tapping into that home equity can help you generate cash for other projects or financial goals like paying off debt, investing in renovations, or paying for other financial milestones like college tuition. Use this calculator to help determine whether a cash out refinance is right for you.

Understanding cash-out refinancing

Cash-out refinancing allows homeowners to refinance their mortgage while borrowing more than they owe, pocketing the difference. It's an effective way to leverage your home's equity for large expenses, home improvements, or debt consolidation. This guide will walk you through the essentials of cash-out refinancing, helping you make an informed decision.

What does this mortgage cash out refinance calculator do?

A cash-out refinance lets you liquidate some of your home equity by refinancing your current mortgage balance for more than what you owe and pocketing the difference in cash. Like any refinance, there are costs associated with the process (more on this below) and it will only make sense to go through with it if you stand to gain some financial advantage. If you want to know whether a cash out refinance is the right decision for you, you’ll need to do some quick calculations to weigh the benefits and risks.

This calculator determines how much money you could borrow with a cash out refinance and the cost of your new month mortgage payment based on your current home value, the outstanding balance of your home loan, and your current credit score. You can also add details about your property taxes, homeowners insurance premium, and HOA fees if applicable for even more detailed results.

Keep in mind that the amount of equity you can access with a cash-out refinance is partially determined by your loan-to-value ratio (LTV). Because cash-out refinances are considered riskier than rate-and-term refinances, most lenders require that your cash-out refinance LTV stays at or below 80%. If you’re still paying for private mortgage insurance (PMI) you might not get approved for a cash-out refinance.

How to use Better's cash out refi calculator

Step 1: Share the current value of your home (can be an estimate)
Step 2: Share the current balance on your mortgage
Step 3: Share your credit score (can be a range)

Cash out refinance costs

Just like when you closed on your original home loan, refinancing your mortgage comes with some standard costs and fees baked into the process. In general, you should expect to pay between 2%—5% of your loan’s principal amount in closing costs for a cash-out refinance. The total cost can be driven up by appraisal fees, title fees, and (with some lenders) loan origination fees. Better Mortgage never charges application, origination, underwriting, processing or commission fees.

In addition to the upfront costs of doing a cash-out refinance, you need to consider the long-term costs—namely, your new principal loan amount and your new interest rate. Because lenders consider cash-out refinances riskier than rate-and-term refinances, interest rates on cash-out refis are generally higher. However, if market rates have dipped or your credit score has improved since you got your original mortgage, you may still be able to lock in a more favorable interest rate than your current financing.

Is a cash out refinance a good idea?

Cash-out refinancing has clear advantages for some homeowners, particularly in situations where you can stand to see a return on the money you’re spending. If you’re planning to put the cash from refinancing toward an appreciating asset like education or home renovations (investments where value increases over time) or paying off high-interest debt, then doing a cash-out refinance might make sense. Ultimately you have to weigh the benefit against the upfront costs as well as the impact it might have on your mortgage interest rate, term, and monthly payments.

There are some cases when a cash-out might not be the best move. If you use it for something like a new car, vacation, wedding, or risky business venture, you likely won’t see a return on your spend. You’ll still have to pay that debt off via your new home loan (with interest), and if you’re unable to pay, you could put your home at risk. Bottom line? If there’s no clear financial benefit, a cash-out refinance may not be the right call for you.

How long does a cash out refinance take?

Just like when you started the process of financing your home loan, refinancing begins with getting pre-approved by your lender. This helps you understand the types of loans and interest rates available to you and involves a quick review of your financial history—including debt, credit score, and income. (Getting pre-approved with Better Mortgage only takes a few minutes and doesn’t require a hard credit check, meaning your credit score won’t be impacted by this step.)

The deja vu doesn’t end there! From locking your rate and submitting financial documentation to conditional approval and closing, many of the steps involved in a cash-out refinance will feel familiar. In general, a cash-out refinance can take 5–7 weeks to complete with most traditional lenders. At Better Mortgage, our average closing time is 32 days—10 days faster than the industry average—and our online process is simple and streamlined.

Overview: Costs, benefits, and process of cash-out refinancing

Benefits:

• Access to equity: Convert your home equity into cash for your needs.

• Potential for a lower interest rate: Refinance your mortgage at a potentially lower rate than your original loan or credit cards.

• Debt consolidation: Use the funds to consolidate high-interest debt.

Costs:

• Closing costs: Typically range from 2% to 6% of your loan amount.

• Higher interest rates: Cash-out refinances typically have higher interest rates than rate-term refinances where you are not taking out any cash.

• Longer loan term: Extending your mortgage term can mean more interest paid over time.

Process Considerations:

• Credit score impact: Your credit score plays a significant role in terms and rates.

• Appraisal: An appraisal is often necessary to determine your home's current value.

• Loan-to-value ratio: Most lenders require you to maintain a certain percentage of equity in your home.

Frequently Asked Questions

What is cash-out refinancing?

Cash-out refinancing involves replacing your current mortgage with a new one for a higher amount than you owe, allowing you to take the difference in cash.

How does cash-out refinancing affect my mortgage rates?

Cash-out refinancing will replace your existing mortgage and rate with a new one. The interest rate on your new mortgage will depend on your credit score, mortgage rates at the time of refinancing, and other factors.

Can I use cash-out refinancing to pay off debt?

Yes, many homeowners use the funds from cash-out refinancing for debt consolidation, home improvements, or other significant expenses.

Cash out with Better

Better’s Home Advisors can help you find the best refinance for you. Because they don’t work on commission, they’re committed to your best financial interests rather than chasing a sale.

Like what you see in the calculator? Get started with a pre-approval in as little as 3 minutes.