Cash Out Refinance Loans
Cashing Out refers to the refinancing of a loan where the homeowners will borrow money on their own home and “cash out” a certain amount of funds.
By cashing out on your home, you can obtain cash on the value of your own home to pay off debts or upcoming expenses. The refinance transaction can also provide you with a better mortgage loan interest rate that will save on your monthly mortgage payments during the loan, and it’s tax-deductible.
How You Can Benefit from a Refinance
A cash-out refinance allows you to replace your existing mortgage with a new, larger loan and pocket the difference in cash. It's a smart way to tap into the equity you've built in your home to fund major expenses, consolidate debt, or invest in your financial future—all while potentially securing a better interest rate than your current mortgage.
How It Works
With a cash-out refinance, you borrow more than you currently owe on your home and receive the difference as a lump sum payment at closing. For example, if your home is worth $400,000 and you owe $250,000, you might refinance for $320,000—paying off your original loan and receiving $70,000 in cash (minus closing costs). Your new mortgage replaces the old one with updated terms and rates.
Popular Uses for Cash-Out Funds
Homeowners use cash-out refinancing for a variety of purposes: home renovations and improvements that increase property value, consolidating high-interest credit card or personal loan debt, paying for college tuition or major medical expenses, starting a business, or making investment property purchases. The funds are yours to use as you see fit.
Key Benefits
- Lower interest rates compared to credit cards, personal loans, or HELOCs
- Tax-deductible interest when funds are used for home improvements (consult your tax advisor)
- Single monthly payment simplifies your finances by consolidating debt
- Flexible loan amounts based on your available equity
- Predictable payments with fixed-rate options
- Potential to improve credit score by paying off high-utilization revolving debt
Is Cash-Out Refinancing Right for You?
Cash-out refinancing makes the most sense when you have significant equity built up, current mortgage rates are competitive with or lower than your existing rate, and you need funds for important expenses that will improve your financial situation. It's particularly valuable for consolidating high-interest debt or making home improvements that increase your property's value.
Lower Monthly Payments
Reduce your payment through better rates or extended terms
Cash-Out Equity
Access your home's increased value for major expenses
Drop PMI
Eliminate private mortgage insurance with sufficient equity
Refinancing is simply getting one loan to pay off another. It allows you to replace your current mortgage with a new one, potentially with better terms.
Typically, the closing cost of a refinance is between 1% and 2% of the loan amount, including lender fees. You may choose to pay points to lower your interest rate, or opt for a low- or no-cost refinance.
Yes. The general rule is that you need to have a 90% loan-to-value ratio before you can refinance. This means your home should be worth about 10% more than your current loan balance.
Yes. Depending on the type of refinance loan you choose, you can take out cash to use for bills, home repairs, or whatever you might need it for.
A typical refinance usually takes between 2 and 4 weeks. Getting your home appraised is usually where most delays occur, so scheduling an appraisal quickly can help expedite the process.
Not exactly. While better credit scores result in better interest rates, you can still qualify for a refinance with less-than-perfect credit. You'll want to ensure the rate reduction makes refinancing worthwhile.
It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance.
Ready to Access Your Home's Equity?
Find out how much cash you could receive and what your new monthly payment would be. Contact us today for a free consultation and personalized rate quote based on your home's equity and financial goals.