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How much money can I take out of a free and clear home?

How do I determine how much money I can take out with a cash-out refinance on a property I own free and clear?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

When you do a cash-out refinance there are two factors that determine what size loan you qualify for and how much money you can take out of the property. The first factor is your personal and financial profile including your monthly gross income, debt, credit score, employment history and other borrower qualification factors. The lender uses this information to determine what size mortgage and monthly payment you can afford. You can use our Mortgage Qualification Calculator to calculate how much mortgage you can afford based on your monthly gross income, debt and current interest rates.

The second factor that determines your loan amount is the value of the property you are refinancing. You may be able to afford a $200,000 mortgage based on your financial profile but if the appraised value of the property you are refinancing is only $150,000, lenders do not lend you more than the value of the property. Additionally, some lenders may limit the amount of money you can take out with a cash-out refinance and may inquire about the use of proceeds. Most lenders permit a maximum loan-to-value (LTV) ratio of 80% with a cash-out refinance, which means you can take-out 80% of the value of your property, but some lenders may use a lower LTV ratio limit. Policies vary by lender so make sure you understand how much money you can take out by refinancing before you select a lender. We provide a thorough overview of a cash-out refinance on FREEandCLEAR for you to review.

We recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review lenders in your area by clicking INTEREST RATES and we advise you to contact three-to-four lenders as underwriting policies can vary. Our INTEREST RATES function also enables you to shop lenders to find the mortgage with the lowest rate and fees.  Please note that the interest rate on a cash-out refinance is higher than the rate on a standard refinance.  Additionally, the interest rate for a cash-out refinance is usually higher for jumbo loan amounts so it is important to compare lenders to find the mortgage with the most attractive terms.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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