Cash-Out Refinance Calculator
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How Cash-Out Refinancing Works
In a cash-out refinance, you replace your existing mortgage with a new, larger loan. The new loan pays off your old balance, and the difference arrives as cash at closing.
Example (using the defaults above): You owe $300,000 on a $480,000 home. You refinance into a $340,000 loan at 6.75%. The old $300,000 balance is paid off at closing; after $7,000 in closing costs you receive $33,000 in cash. Your monthly payment drops from $2,316 to $2,206 because the rate fell from 8.00% to 6.75%.
What changes versus a rate-term refinance
- Higher loan balance: Your new loan exceeds your old payoff amount, which raises your LTV and may trigger PMI.
- Payment may increase or decrease: A larger principal pushes the payment up; a lower rate pushes it down. The net effect depends on how much you cash out and how much the rate changes.
- More total interest: Borrowing more principal over a new 30-year term means more interest paid over the life of the loan — even if the rate is lower.
- Single monthly payment: Unlike a HELOC, there is no second payment. The new loan replaces the old one entirely.
Common uses for cash-out funds
- Home renovation or addition — the most financially defensible use since it may add to the home's value
- High-interest debt consolidation — effective if you commit to not re-accumulating the debt
- College tuition or large planned one-time expenses
- Down payment on an investment property
- Replenishing a depleted emergency fund
LTV Limits by Loan Type
Your loan-to-value ratio after the cash-out determines which loan programs you qualify for and whether private mortgage insurance applies. Each loan type sets its own maximum LTV for cash-out refinances:
| Loan Type | Max Cash-Out LTV | PMI / MIP? | Key Notes |
|---|---|---|---|
| Conventional | 80% | PMI if >80% | Best rates below 80%; PMI cancels at 78–80% LTV |
| FHA | 80% | MIP always | 1.75% upfront + 0.55%/yr MIP for life of loan in most cases |
| VA | 90% | No PMI | Veterans only; no PMI at any LTV; funding fee applies |
| USDA | N/A | — | Cash-out refinances are not available on USDA loans |
| Texas (all types) | 80% | Per loan type | Constitutional cap; 12-month waiting period after purchase or prior cash-out. Texas refinancing rules → |
| Jumbo | 65–75% | Per lender | Stricter LTV and reserve requirements; lender-specific |
Exceeding 80% LTV on a conventional loan adds PMI of roughly 0.5–1.5% of the loan balance per year. On a $350,000 loan, that is $145–$438 per month — an ongoing cost that must be factored into the true cost of the cash-out.
Cash-Out Refinance vs. HELOC vs. Home Equity Loan
All three options let you access home equity. Which is best depends on your current mortgage rate, how much you need, and your risk tolerance:
| Feature | Cash-Out Refi | HELOC | Home Equity Loan |
|---|---|---|---|
| Rate type | Fixed | Variable (prime + margin) | Fixed |
| Impact on first mortgage | Replaces it entirely | Keeps it (2nd lien) | Keeps it (2nd lien) |
| Typical closing costs | $5,000–$15,000 | $0–$1,000 | $2,000–$5,000 |
| Max combined LTV (typical) | 80% (conv.) | 85–90% CLTV | 85–90% CLTV |
| Access to funds | Lump sum at closing | Draw as needed (revolving) | Lump sum at closing |
| Best for | Rate is also improving; large one-time need | Ongoing or variable costs; want to preserve low first-rate | Known one-time expense; rate certainty without full refi |
The key decision rule: If your current mortgage rate is significantly lower than today's rates, a cash-out refi forces you to replace that low rate on your entire balance — a very expensive trade. A HELOC or home equity loan lets you access your equity without disturbing the first mortgage. Only consider a cash-out refi when the new rate is equal to or better than what you currently have.
When a Cash-Out Refinance Makes Financial Sense
Favorable conditions
- Your current rate is at or above today's market rate: Refinancing to a lower rate anyway makes adding cash-out relatively cheap — you're not giving up a below-market rate.
- The home has appreciated significantly: More equity means more cash available while keeping your LTV well below 80%.
- High-interest debt consolidation: Replacing 20–25% APR credit card debt with a 7% mortgage rate saves hundreds per month — but only if you don't re-accumulate the debt.
- Renovations that add value: Kitchen remodels, additions, and energy upgrades often return 60–80 cents on the dollar in resale value.
- Long time horizon: The longer you keep the loan, the more any monthly savings accrue relative to closing costs.
Unfavorable conditions
- Your current rate is well below today's rates: A 3% mortgage replaced with a 7% one to access $50,000 in equity is extremely costly over the loan life.
- You plan to sell or move within a few years: Closing costs of $7,000–$15,000 take years to break even — selling before that point means a net loss.
- The cash-out pushes LTV above 80%: Adding PMI of $200–$400/month can easily negate any rate savings.
- Consolidating debt you'll run up again: Converting unsecured debt into secured (home-backed) debt and then re-accumulating the unsecured debt leaves you worse off and puts the home at risk.
3 Cash-Out Refinance Scenarios — Real Numbers
Cash-out refinances look very different depending on your current rate, how much equity you hold, and why you want the cash. These three examples cover the most common situations.
Scenario 1 — Rate drop + cash-out (2023 buyer)
Payment drops despite the larger loan
| Current balance | $340,000 at 8.00% |
| Home current value | $450,000 |
| Current monthly P&I | $2,552/mo (27.5 yrs remaining) |
| Cash-out amount | $20,000 (new loan $360K, 80% LTV) |
| New rate | 6.50% / 30-year fixed |
| New monthly P&I | $2,276/mo |
| Monthly savings | $276/mo even with $20K more debt |
| Closing costs (2%) | $7,200 |
| Break-even | 26 months |
This is the clearest win case. Homeowners who bought in 2022–2023 at 7.5–8.5% often have enough appreciation to support a modest cash-out while still lowering their monthly payment. The $20K in cash also reduces the effective cost of the closing fees.
Note on the cash-out interest cost: The $20K increase in loan balance at 6.5% over 30 years costs approximately $25,500 in extra interest. If the $20K goes toward home improvements that add value — or replaces higher-rate debt — that cost is often worthwhile.
Scenario 2 — Debt consolidation (mathematical win)
Replacing high-rate debt with mortgage-rate debt
| Current mortgage | $280,000 at 6.50% → $1,770/mo P&I |
| Credit card debt | $40,000 at 21% APR → $800/mo minimum |
| Car loan | $20,000 at 7.5% → $392/mo (5-yr loan) |
| Total monthly obligations | $2,962/mo |
| New loan | $340,000 at 7.00% / 30-yr (slight rate premium for cash-out) |
| New monthly P&I | $2,262/mo |
| Monthly cash freed up | $700/mo |
| Closing costs (2%) | $6,800 |
| Break-even | 9.7 months |
The math case is overwhelming: break-even under 10 months. However, this comes with an important trade-off — the credit card and car loan would have been paid off in 3–5 years, while the consolidated debt now runs 30 years at 7%. Total lifetime interest is higher even though monthly cash flow improves immediately. This refinance makes sense for cash-flow relief; it does not reduce total debt cost over the long run.
Scenario 3 — Giving up a low rate (cautionary)
When cash-out destroys value
| Current balance | $280,000 at 3.25% (locked 2021) |
| Home current value | $500,000 |
| Current monthly P&I | $1,442/mo (23 yrs remaining) |
| Desired cash | $100,000 |
| New loan | $380,000 at 7.00% / 30-year fixed |
| New monthly P&I | $2,527/mo |
| Monthly increase | +$1,085/mo more expensive |
| Extra annual cost | $13,020/yr |
| Extra cost over 10 years | $130,200 (for $100K in cash) |
If your current rate is significantly below today's market, a cash-out refinance is almost never worth it. Over 10 years you would pay an extra $130,000 in payments to access $100,000 in equity. The better alternatives are a Home Equity Loan or HELOC, which leave your first mortgage untouched and let you borrow against equity at a separate, potentially lower rate.
Frequently Asked Questions
How much can I cash out on a refinance?
On a conventional loan, the standard cap is 80% LTV. If your home is worth $480,000, the maximum new loan is $384,000 (80% × $480,000). If your current balance is $300,000, you can cash out up to $84,000 — less closing costs. The calculator above shows your specific maximum under "Max cash-out at 80% LTV." VA allows 90%; Texas caps all types at 80%.
Will I need PMI after the cash-out?
On a conventional loan, yes — if your new LTV exceeds 80%. PMI typically costs 0.5–1.5% of the loan per year and can be cancelled once you reach 20% equity. VA loans never require PMI. FHA loans always carry MIP regardless of LTV. If your cash-out keeps your LTV at or below 80%, no PMI applies on a conventional loan.
Do I need a new appraisal?
Usually yes. Lenders need to confirm the current home value to determine your LTV and verify you're within program limits. Some lenders offer appraisal waivers using automated valuations for borrowers with very low LTVs and strong equity history, but these are less common for cash-out refinances than for rate-term refinances.
What can I use the cash for?
Conventional, FHA, and most loan types impose no restrictions on fund use. VA loans require a "net tangible benefit" but this is broadly interpreted. Common uses include home improvement, debt consolidation, tuition, and investment. Financially, using proceeds to increase the home's value or eliminate high-interest debt is the most defensible choice.
Related Guides
- Cash-Out Refinance Calculator Guide — How Much Equity Can You Access?
- Cash-Out Refinance vs HELOC — Which Is Better for Your Situation?
- Loan-to-Value Calculator — LTV, Equity, and Cash-Out Potential
- Mortgage Savings Calculator — Monthly and Lifetime Net Savings
- Break-Even Calculator — How Many Months to Recoup Closing Costs?
- Refinance Cost Calculator — Itemize Every Closing Fee
- Refinance Situations — Real-World Scenarios with Numbers
- Full Refinance Calculator — Compare Multiple Lender Offers Side by Side
- FHA Refinance Calculator — Cash-Out + MIP Options
- VA Cash-Out Refinance Calculator — Funding Fee & Savings
- APR Calculator — Compare Cash-Out Offers by True Annual Cost
Compare Full Lender Offers Side by Side
The full RefinanceUSA calculator lets you enter rate, term, and closing costs for multiple lenders at once — showing you exactly which offer produces the lowest total cost for your situation.
Open the Refinance CalculatorSources & References
- Consumer Financial Protection Bureau (CFPB) — Explore Mortgage Rates
- Freddie Mac Primary Mortgage Market Survey (PMMS)
- Federal Housing Finance Agency (FHFA) — Conforming Loan Limits
- IRS Publication 936 — Home Mortgage Interest Deduction
- U.S. Department of Housing and Urban Development (HUD) — FHA Loan Programs