How Cash-Out Refinancing Works
- Calculate Maximum Loan: Most lenders allow up to 80% Loan-to-Value (LTV) for cash-out refinancing on primary residences.
- Subtract Existing Debt: The existing mortgage balance is paid off first from the new loan proceeds.
- Receive Cash: The remaining balance after paying off the old mortgage and closing costs is paid to you in cash.
Cash-Out Refinance Scenario ($450,000 Home Value @ 80% LTV)
| Existing Mortgage Balance | Max Refinance Loan (80%) | Available Cash Payout | New Monthly Payment (6.5%) | Retained Equity (20%) |
|---|---|---|---|---|
| $250,000 | $360,000 | $110,000 | $2,275.46 | $90,000 |
| $200,000 | $360,000 | $160,000 | $2,275.46 | $90,000 |
Frequently Asked Questions
What is a cash-out refinance?
A cash-out refinance replaces your existing mortgage with a larger loan, allowing you to withdraw the difference in cash.
How much cash can I get from a cash-out refinance?
Most conventional lenders allow you to borrow up to 80% of your home’s appraised value minus your existing mortgage balance.