See how much cash you can pull from your home equity, what your new mortgage payment would be, and whether cash-out refinancing beats a HELOC or home equity loan.
New payment:≈ $1,955/mo at 6.0% for 30 years, vs their old payment of ≈ $1,228/mo
Total interest on new loan:≈ $377,700 over the full 30-year term
The payment rises because they borrowed more — the benefit is the $120,000 in cash, used here for renovations that increase the home's value.
💳 Debt Consolidation at a Lower Rate
Jordan has a home worth $500,000 and a $250,000 mortgage at 7.0% with 20 years left (payment ≈ $1,939/mo), plus $60,000 in credit card debt at 24% interest.
Max cash-out at 80% LTV:$150,000 — they only take the $60,000 they need.
Monthly savings:≈ $151/mo, with a break-even of about 33 months ($5,000 ÷ $151)
Replacing 24% credit card debt with a ~5.5% mortgage dramatically cuts interest costs. Jordan breaks even on closing costs in under 3 years — a smart trade if they stay in the home.
Understanding Cash-Out Refinancing
A cash-out refinance replaces your existing mortgage with a new, larger loan. You receive the difference between the new loan amount and your old balance as cash at closing. The new loan pays off your old mortgage, and you start fresh with a new rate, term, and monthly payment on the full balance.
Maximum Cash-Out Formula
Max Cash-Out = Home Value × (Target LTV ÷ 100) − Current Balance
Standard conventional cash-out max LTV is 80% (this calculator allows 60–90%)
New Monthly Payment Formula
M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)
Standard amortizing loan payment formula
P = New Loan Amount | r = Monthly Rate (Annual ÷ 12) | n = Total Months (Term × 12)
P = old balance + cash-out + closing costs (if financed)
Key Cash-Out Metrics
Monthly Savings = Old Payment − New Payment
Negative means your payment increases — a cost, not a saving
Break‑Even = Closing Costs ÷ Monthly Savings
If savings are zero or negative, there is no break-even
Total Interest = M × n − P
Interest paid over the full life of the new loan
Step-by-Step Cash-Out Analysis
1
Estimate your home value: Use an appraisal, comparative market analysis, or online estimate — your lender will order a formal appraisal.
2
Confirm balance and LTV: Note your current balance and loan-to-value ratio. Most conventional cash-out loans cap at 80% LTV.
3
Compute maximum cash-out: Home Value × LTV − Current Balance. If negative, you have no equity to cash out.
4
Choose your cash-out amount: Borrow only what you need — a smaller cash-out means a smaller loan and lower payments.
5
Add closing costs: Typically 2–5% of the loan. Decide whether to finance them or pay out of pocket.
6
Calculate the new payment: Use the amortization formula on the full new loan amount at the new rate and term.
7
Compare old vs new payment: Positive savings create a break-even timeline; a higher payment means no break-even.
8
Compare against HELOC alternatives: A HELOC offers interest-only payments during the draw period but at a variable rate that can rise with prime.
When Cash-Out Refinancing Makes Sense
📉 Rate Drop + Equity Need
You can lower your rate while pulling cash at the same time — one closing instead of two transactions.
🏡 Long-Term Plans
You plan to stay in the home for years, so the reset loan term and closing costs have time to pay off.
💳 High-Interest Debt
Replacing 20%+ credit card debt with mortgage-rate debt can save thousands in interest annually.
⚠️ Caution Near Payoff
If your mortgage is nearly paid off, a new 30-year loan resets the clock — you'd pay interest for decades on cash you could get cheaper elsewhere.
A cash-out refinance is a mortgage refinance in which you replace your existing home loan with a new loan that is larger than what you currently owe. The lender pays off your old mortgage and gives you the difference — your "cash-out" — as a lump sum at closing. Because the loan is secured by your home, lenders can offer much lower interest rates than unsecured borrowing like credit cards or personal loans.
How much you can take out depends on your loan-to-value ratio (LTV) — your loan amount divided by your home's appraised value. For conventional loans, the standard cash-out maximum is 80% LTV, meaning your new loan (old balance + cash-out) cannot exceed 80% of your home's value. If your home is worth $400,000, the most you can owe after refinancing is $320,000, so with a $200,000 balance your maximum cash-out is $120,000.
Max Cash‑Out = Home Value × (LTV ÷ 100) − Current Balance
Example: $400,000 × 80% − $200,000 = $120,000
Cash-out refinancing typically involves closing costs of 2% to 5% of the new loan amount — appraisal, origination, title insurance, and recording fees. You can pay these out of pocket or finance them into the loan, but financing means paying interest on them for the life of the mortgage. The new loan also resets your term: rolling a 20-year-old mortgage into a new 30-year loan stretches payments — and total interest — far into the future, so weigh the cash today against decades of extra interest.
Cash-Out Refinance vs. HELOC vs. Home Equity Loan
If you need cash, your home equity can be accessed three main ways. A cash-out refinance gives you a lump sum and a brand-new first mortgage at a fixed rate. A home equity loan ("second mortgage") also gives a lump sum but keeps your existing first mortgage intact. A home equity line of credit (HELOC) works like a credit card secured by your home — you draw what you need and pay variable-rate interest.
Feature
Cash-Out Refinance
HELOC
Home Equity Loan
Interest rate
Fixed, slightly higher than rate-and-term refis
Variable (prime + margin), can rise
Fixed
Monthly payment
Principal + interest, fully amortized
Interest-only during draw period (often)
Principal + interest, fully amortized
Closing costs
2%–5% of loan amount
Low to none
2%–5% of loan amount
Max LTV
≈ 80%
Up to 80–85% combined
Up to 80–85% combined
Access to funds
Lump sum at closing
Revolving line, draw anytime
Lump sum at closing
Main risk
Resets mortgage term; larger first lien
Payments jump when rates rise
Second lien; must manage two payments
Which is right for you? Choose a cash-out refinance for a lump sum, a fixed rate, and possibly a lower rate on your whole balance. Choose a home equity loan to keep your current first mortgage's rate and term. Choose a HELOC for flexible, ongoing access — but payments are interest-only during the draw period and your variable rate can push them higher.
The HELOC Comparison in This Calculator
The calculator shows an illustrative interest-only HELOC payment on the same cash-out amount. Because HELOCs charge interest only during the draw period (typically the first 10 years), the payment looks smaller — but the principal never decreases and the rate is variable. A cash-out refi payment is higher because it repays principal, but the rate is locked for the full term.
Frequently Asked Questions
How much cash can I take out of my home?
For a conventional cash-out refinance, most lenders cap the new loan at 80% of your home's value. Your maximum cash-out is: Home Value × 80% − Current Balance — on a $400,000 home with a $200,000 balance, that's $120,000. FHA caps near 80% too, while VA loans can allow up to 90% for eligible veterans. If your balance already exceeds the cap, you have no equity to cash out.
What's the difference between a cash-out refinance and a HELOC?
A cash-out refinance replaces your entire mortgage with one new fixed-rate loan and gives you a lump sum at closing. A HELOC is a revolving line of credit secured by your home — you draw funds as needed and typically pay interest-only during the draw period at a variable rate tied to prime. The refi offers payment certainty; the HELOC offers flexibility, but your payment can rise with rates.
How much do cash-out refinance closing costs run?
Plan for 2% to 5% of the new loan amount — on a $300,000 loan, roughly $6,000 to $15,000. Typical fees: appraisal ($400–$700), origination (0.5–1% of loan), title insurance and escrow ($500–$2,000), credit report, and recording fees. You can pay out of pocket or finance them into the loan — financing means paying interest on them for the full term.
Is the cash from a cash-out refinance taxable?
No — the cash you receive is loan proceeds, not income, so it is not taxable when received. However, under the Tax Cuts and Jobs Act, mortgage interest is only deductible on the first $750,000 of acquisition debt; interest on cash-out proceeds spent elsewhere is generally not deductible. Consult a tax professional for your situation.
How soon after buying a home can I do a cash-out refinance?
For conventional loans, Fannie Mae and Freddie Mac require a 6-month seasoning period — you must own the home for at least six months before a cash-out refinance, and many lenders require 12 months. FHA cash-out refinances generally require holding title for at least 12 months. Your equity must also be documented by a new appraisal.
Does a cash-out refinance come with a higher interest rate?
Yes, typically. Cash-out rates run about 0.125% to 0.5% higher than rate-and-term refinances because the lender takes on more risk with a larger balance and cash going to you. Your exact rate also depends on credit score, LTV, and loan amount. That's why this calculator compares old vs new payment: the rate premium and larger balance both push the payment higher.
⚠️ Disclaimer: This Cash-Out Refinance Calculator is for educational and informational purposes only and does not constitute financial, tax, or legal advice. Results are estimates based on the assumptions you enter; actual loan amounts, rates, closing costs, and maximum LTVs depend on your lender, credit profile, property appraisal, and loan program. Borrowing against home equity increases your debt and puts your home at risk if you cannot make payments. Always consult a licensed mortgage or financial professional before making any financial decision.