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.
The calculator also factors in the interest rate, length and program for your new mortgage so you understand how these inputs impact your new monthly payment and potential cost savings. The mortgage rate for a cash out refinance is usually higher than for a regular refinance so this is an important input to consider.
The calculator enables you to compare your existing monthly mortgage payment to your new payment and determine the total interest expense for your new mortgage. You can also review the proceeds you can take out when you refinance, net of closing costs, as well as the estimated minimum property value required to qualify for the mortgage based on a maximum loan-to-value (LTV) ratio. You can use this information to assess if the value of your home is high enough to access the amount of cash you want.
The calculator also shows you how long it takes to recover your 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, reducing your mortgage payment can provide an added benefit.
Use our Cash Out Refinance Calculator to compare numerous financing options to find the one that works best for you. We also offer a version of this calculator that does not require personal information.
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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).
More FREEandCLEAR Mortgage Resources
Review our comprehensive explanation of how a cash out refinance works including key borrower considerations and an informative example of a cash out refinance
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
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
Got mortgage questions? We love answering them. Submit your mortgage questions and receive an informative response within 24 hours
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
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
Cash Out Refinance: http://myhome.freddiemac.com/refinance/cash-out.html