Calculate Your Cash-Out Refinance
Enter your home value, current balance, and desired cash-out amount to see your new loan details and whether you stay within conventional lending limits.
How to Use This Calculator
Each field in the cash-out refinance calculator maps to a specific piece of information you need to gather before running your numbers. Here is a step-by-step guide to filling in each field accurately.
Step 1 — Home Value. Enter the current market value of your home, not what you originally paid for it. If you purchased years ago, your home value has likely changed significantly. To find an accurate figure, get a recent Comparative Market Analysis (CMA) from a local real estate agent, look at recent sale prices of comparable homes in your neighborhood, or use an online home valuation estimate as a starting point. For the most accurate number when you are serious about refinancing, order a professional appraisal — lenders will require one anyway, and it removes any guesswork from your LTV calculation.
Step 2 — Current Loan Balance. This is the principal you still owe on your mortgage, not your original loan amount. Call your mortgage servicer or log into your online account to get the exact payoff balance. Note that the payoff balance may be slightly higher than your statement balance due to accrued interest, so use the formal payoff figure if you want precise results.
Step 3 — Current Interest Rate. Find this on your most recent mortgage statement or in your original loan documents. Enter the annual interest rate, not the APR. If your loan has already adjusted (ARM), use the current rate, not the original rate.
Step 4 — Remaining Term. Enter how many months are left on your existing mortgage. If you started with a 30-year loan and you are 6 years in, your remaining term is 288 months. If you are unsure, your servicer can confirm this.
Step 5 — Cash-Out Amount. Enter how much cash you want to receive at closing. Be thoughtful here: borrow what you need, not the maximum you could get. Every dollar borrowed becomes part of your new loan balance and accrues interest over the entire new loan term. The calculator will show you the maximum available at 80% LTV so you can see where the ceiling is.
Step 6 — New Interest Rate. Enter the rate you have been quoted by a lender for a cash-out refinance. Be aware that cash-out refinance rates are typically 0.125% to 0.25% higher than rate-and-term refinance rates because lenders view them as slightly higher risk. Get at least two or three quotes before entering this number — the difference between lender offers can be substantial over a 30-year term.
Step 7 — New Loan Term. Choose how long you want the new loan to be. Most homeowners default to 30 years, but selecting a shorter term reduces total interest significantly. Use the 15-Year vs 30-Year Calculator to model both options before deciding.
What Is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between the new loan amount and your current balance is paid directly to you at closing in cash. Unlike a home equity loan or a HELOC (Home Equity Line of Credit), which add a second loan alongside your existing mortgage, a cash-out refinance creates a single new first mortgage. You walk away with one loan, one payment, and a lump sum of cash.
The mechanics are straightforward: your lender pays off your old mortgage in full and issues a new loan for a higher amount. The spread — new loan minus old balance — lands in your bank account at closing, minus any closing costs that are not rolled into the loan.
LTV limits by loan type: How much you can cash out depends primarily on your loan-to-value ratio after the refinance. Conventional loans (Fannie Mae and Freddie Mac guidelines) typically cap cash-out refinancing at 80% LTV. FHA loans also permit cash-out up to 80% LTV, though FHA cash-out refinances carry mortgage insurance premiums. VA loans allow eligible veterans to cash out up to 90% of their home's value in many circumstances, making them the most generous option available. Jumbo loans have their own guidelines, often requiring 70%–75% LTV for cash-out.
If your new LTV exceeds 80% on a conventional loan, you will generally be required to pay private mortgage insurance (PMI), which adds a monthly cost. For many borrowers, staying at or below 80% LTV is the most financially efficient strategy.
How It's Calculated
The cash-out refinance calculation involves three key computations: the new loan amount, the loan-to-value ratio, and the new monthly payment.
LTV = (New Loan Amount ÷ Home Value) × 100
Monthly Payment = P × [r(1+r)^n] ÷ [(1+r)^n − 1]
Where P = new loan amount, r = monthly interest rate (annual rate ÷ 12), n = number of monthly payments
The monthly payment formula is standard mortgage amortization, the same formula used for any fixed-rate loan. When you plug in the new larger principal, the same interest rate or a new one, and the new term length, the formula returns your exact new required monthly payment.
Total interest over the life of the new loan equals (monthly payment × number of payments) minus the new loan amount. This figure helps you understand the full cost of accessing your equity — a $60,000 cash-out at 6.5% over 30 years costs roughly $76,000 in additional interest charges beyond what you would have paid on the original balance.
Real-World Example
Tom and Linda's Kitchen Renovation
Tom and Linda bought their home for $450,000 in 2019. Today it is worth $580,000. Their current mortgage balance is $380,000 at 6.875% with 24 years (288 months) remaining. They want $60,000 cash to renovate the kitchen and bathrooms.
New loan amount: $380,000 + $60,000 = $440,000
New LTV: $440,000 ÷ $580,000 = 75.9% — under the 80% conventional threshold, so no PMI and they qualify for standard conventional rates.
Current monthly payment (6.875%, 288 months, $380,000): approximately $2,794/mo
New monthly payment (6.5%, 360 months, $440,000): approximately $2,781/mo
Payment change: Nearly identical — they receive $60,000 cash while keeping virtually the same monthly obligation.
The real cost: New total interest over 30 years at $440,000 and 6.5% is roughly $561,000. Remaining interest on the original loan was approximately $485,000. The $60,000 cash-out costs them approximately $76,000 in additional interest over the life of the loan. That is still dramatically cheaper than financing the renovation on credit cards at 22% APR.
This example illustrates why cash-out refinances are often used for home improvements — the interest rate is far lower than almost any other borrowing option, and improvements can actually increase the home's value, partially offsetting the cost.
When Does a Cash-Out Refinance Make Sense?
A cash-out refinance is not right for every situation. It makes the most financial sense when you are borrowing for a purpose that either generates a return greater than your mortgage rate, reduces other higher-cost debt, or improves an asset that retains or gains value.
Home improvements. Renovating a kitchen, updating bathrooms, adding square footage, or replacing major systems (roof, HVAC, windows) can increase your home's value and improve your quality of life. When the improvements you finance exceed the interest cost over time, a cash-out refinance can be a net-positive investment. Interest paid on home improvement cash-outs may also be tax-deductible — consult a tax professional for your specific situation.
High-interest debt consolidation. If you carry credit card balances at 22% to 28% APR, consolidating them into a mortgage at 6.5% can produce substantial monthly savings and dramatically reduce total interest paid. A $35,000 credit card balance at 22% costs you approximately $7,700 per year in interest alone. Rolled into a 6.5% mortgage, the interest cost on that $35,000 falls to roughly $2,275 per year. The math is compelling — though it requires the discipline not to accumulate new credit card debt after consolidation.
Education costs. Student loan interest rates are typically lower than credit cards but can be 6%–8% or higher for private loans. If your mortgage rate would be lower, a cash-out refinance can reduce education financing costs, though it converts unsecured debt into debt secured by your home.
Emergency fund or major expenses. For significant unexpected expenses where the alternative would be high-interest borrowing, a cash-out refinance can provide emergency liquidity at a cost-effective rate.
When to be cautious. Cash-out refinancing is a powerful tool, but it has risks. Avoid it when your LTV will exceed 80% (PMI adds monthly cost that can outweigh benefits), when you plan to use the cash for depreciating assets like vacations or vehicles, when you are close to retirement and extending debt is problematic, or when your income is variable and a larger payment creates financial risk. Use the Debt Consolidation Calculator to verify whether consolidation truly saves money in your specific case.
Common Cash-Out Refinance Scenarios
Scenario 1: Kitchen Renovation ($50,000)
A homeowner with $290,000 balance on a $420,000 home (69% LTV) wants $50,000 to renovate the kitchen. New loan: $340,000. New LTV: $340,000 ÷ $420,000 = 81.0% — just over the 80% threshold. They have two choices: reduce the cash-out to $46,000 to stay at 80% LTV, or accept PMI on the slightly higher amount. Alternatively, they get an updated appraisal — if the home is actually worth $430,000, the math changes favorably. This scenario shows why having an accurate, current home value matters so much before applying.
Scenario 2: Credit Card Consolidation ($35,000)
A borrower has $250,000 remaining on a $380,000 home (65.8% LTV) and $35,000 in credit card debt at an average of 22% APR. They cash out $35,000 to pay off all cards. New loan: $285,000. New LTV: 75%. No PMI. Previous credit card minimum payments totaled $875/month. The new mortgage payment increases by approximately $230/month over the base payment. Net monthly savings: $645/month. Annual savings: $7,740. Over the life of the loan, the interest cost on the $35,000 at 6.5% is roughly $44,000 — compared to tens of thousands more if they continued minimum payments at 22%. The key risk: they must not rebuild credit card balances after consolidation.
Scenario 3: Investment Property Down Payment
An experienced real estate investor considers cashing out $80,000 from their primary residence (currently at 58% LTV, rising to 74% after cash-out) to use as a down payment on a rental property. This is a higher-risk strategy because they are leveraging one property to acquire another. If the rental generates sufficient cash flow to cover both the investment property mortgage and the increased primary home payment, the strategy can work well. If the rental sits vacant, income drops, or the investment property loses value, the investor has a larger primary mortgage with no offsetting income. This scenario is best discussed with a financial advisor before proceeding.
Tips and Strategies for Cash-Out Refinancing
Calculate your maximum cash-out before you start shopping. Use this calculator to determine the exact cash-out limit at 80% LTV. Knowing your ceiling helps you negotiate with lenders from a position of knowledge rather than guessing what you qualify for. The formula is: (Home Value × 0.80) − Current Balance = Maximum Cash-Out.
Shop cash-out rates specifically. Cash-out refinance rates are higher than rate-and-term refinance rates — typically by 0.125% to 0.25% or more. Get quotes from multiple lenders and ask specifically about cash-out pricing versus rate-and-term pricing. The spread between lender offers can be significant, and you are under no obligation to use your current servicer.
Consider a HELOC if you want flexibility. If you have a low existing mortgage rate that you don't want to give up, a Home Equity Line of Credit (HELOC) may be a better option than a cash-out refinance. A HELOC is a second loan that leaves your first mortgage intact, giving you access to equity without changing your primary rate. The tradeoff is that HELOCs typically have variable rates. Use the Refinance Savings Calculator to model your current rate versus what a new cash-out rate would cost before deciding.
Borrow purposefully, not maximally. Lenders will offer you the maximum they are willing to approve. That does not mean you should take it. Every dollar you borrow costs you interest for decades. Borrow only what you actually need for the specific purpose at hand. If you need $40,000 for a renovation, do not cash out $75,000 just because the equity is available.
Keep your LTV under 80% to avoid PMI. Private mortgage insurance on a $440,000 loan can cost $100 to $200 per month or more. That cost directly erodes the value of the cash you received. Do the math — if staying under 80% LTV means taking out $10,000 less cash, the PMI savings over several years may outweigh that reduction. Verify your PMI obligation using the PMI Removal Calculator.
Time your refinance relative to your current rate. If your existing mortgage rate is already competitive, a cash-out refinance that raises your rate even slightly should be analyzed carefully. Use the Break-Even Calculator to understand how long it takes to recoup the cost of the transaction.
Frequently Asked Questions
What is the difference between a cash-out refinance and a HELOC?
A cash-out refinance replaces your existing mortgage entirely with a new, larger first mortgage. You get the difference in cash at closing. A HELOC is a separate second loan that sits alongside your existing mortgage — your original loan stays unchanged. Cash-out refinances make sense when you can get a better rate on the new first mortgage or want to consolidate into one loan. HELOCs are better when you want to preserve a low first-mortgage rate and need flexible access to funds over time, since HELOCs work like a revolving credit line you can draw from as needed.
What is the maximum amount I can cash out?
For conventional loans, the standard limit is 80% LTV. Your maximum cash-out equals (Home Value × 0.80) − Current Balance. FHA loans also cap at 80% LTV for cash-out refinances. VA loans allow up to 90% LTV for eligible veterans. Jumbo loans vary by lender and typically require 70%–75% LTV. Your actual qualifying amount also depends on your credit score, income, and debt-to-income ratio — the LTV limit is one constraint, but underwriting requirements may be more restrictive in your specific situation.
Will my rate be higher for a cash-out refinance versus a rate-and-term refinance?
Yes, typically. Lenders price cash-out refinances at a slightly higher rate than rate-and-term refinances — usually 0.125% to 0.25% more, though the premium varies by lender, loan-to-value ratio, and credit profile. This is because cash-out refinances are considered modestly higher risk since the borrower is increasing their loan balance. The higher rate is reflected in Fannie Mae's Loan Level Price Adjustments (LLPAs), which most lenders pass through to the borrower. Always ask lenders to quote you both cash-out and rate-and-term rates so you can see the premium clearly.
Can I use cash-out proceeds to cover my closing costs?
Yes, you can roll closing costs into the new loan so you pay nothing out of pocket at closing — but understand that rolled-in closing costs increase your loan balance and accrue interest for the life of the loan. For example, $8,000 in closing costs rolled into a 30-year loan at 6.5% costs roughly $10,200 in total (principal plus interest) by the time the loan is paid off. It is mathematically cleaner to pay closing costs out of pocket if you have the funds, and to calculate the cash-out amount as a separate figure.
Is cash-out refinance interest tax deductible?
The deductibility depends on how you use the funds. Under current IRS rules, mortgage interest on cash-out proceeds used to "buy, build, or substantially improve" your home is deductible up to certain loan balance limits. Interest on cash-out proceeds used for other purposes — debt consolidation, tuition, or other expenses — is generally not deductible. Tax law in this area is nuanced and changes periodically, so consult a CPA or tax advisor to understand the specific rules applicable to your situation before relying on deductibility as part of your cost-benefit analysis.
What if home values drop after I do a cash-out refinance?
A decline in home values after a cash-out refinance leaves you with a higher loan balance relative to your home's new lower value. If you cashed out to 75% LTV and values drop 15%, your LTV could rise to 88% or higher — meaning you owe more than 80% of the home's current value. This limits your future refinancing options and may require PMI if you try to refinance again. It doesn't affect your current loan terms or payment, but it eliminates flexibility. This is why borrowers should avoid cashing out to the maximum limit in markets where values may be near a peak.
Can I use cash-out proceeds to invest in the stock market?
You can, but this strategy carries significant risk and should be approached with caution. The logic is that if your investments earn more than your mortgage rate, you come out ahead. However, investment returns are not guaranteed and are highly variable — while mortgage interest is a certain, fixed cost. If markets decline after you borrow, you are left with a larger mortgage and diminished investments simultaneously. Most financial planners consider this an advanced strategy appropriate only for investors with significant experience, strong emergency reserves, stable income, and a long investment time horizon. See our Refinance Glossary for more context on equity and LTV concepts.
What credit score do I need for a cash-out refinance?
Most conventional lenders require a minimum credit score of 620 for a cash-out refinance, though scores below 700 may face pricing adjustments that make the loan significantly more expensive. The best rates are typically available to borrowers with scores of 740 or higher. FHA cash-out refinances may be available with scores as low as 580, though individual lenders often set their own overlays higher. Your credit score affects not just whether you qualify but also the rate you receive — a 40-point difference in credit score can translate to 0.25%–0.5% difference in your interest rate on a cash-out refinance.
Related Calculators
Use these tools alongside the Cash-Out Refinance Calculator to build a complete picture of your options:
- LTV Calculator — Verify your loan-to-value ratio before and after the cash-out
- Debt Consolidation Calculator — Model whether rolling high-interest debt into your mortgage actually saves money
- Break-Even Calculator — Find how long to recover your closing costs
- PMI Removal Calculator — Understand when PMI can be removed if your LTV exceeds 80%
- Closing Cost Calculator — Estimate the closing costs you will owe on the new loan
- Amortization Calculator — See your full payment schedule on the new loan
External Resources
These authoritative sources provide additional guidance on cash-out refinancing, home equity access, and mortgage programs:
- CFPB: What Is a Mortgage Refinance and How Does It Work? — The Consumer Financial Protection Bureau's plain-language overview of the refinancing process, including cash-out options.
- HUD: Refinancing — The U.S. Department of Housing and Urban Development's guidance on refinancing, including FHA-specific programs and consumer protections.
- Freddie Mac: Refinancing Guide — Freddie Mac's homeowner education resources covering when to refinance and what to expect from the process.
- Fannie Mae: Know Your Options — Fannie Mae's educational resource for homeowners exploring their loan options, including refinancing and equity access strategies.