What Is Cash-Out Refinance?
Cash-Out Refinance: A refinance for more than you owe, paying you the difference in cash.
A cash-out refinance replaces your mortgage with a larger one and pays you the difference, minus closing costs.
Limits
Most programs cap the new loan at a percentage of the home's value:
- Conventional: 80% LTV for a primary home
- FHA: 80%
- VA: up to 90%, sometimes higher with some lenders
- Investment properties: often 70% to 75%
Example
A home worth $500,000 with a $250,000 balance. At 80% LTV, the maximum new loan is $400,000, so up to $150,000 before closing costs.
Things to weigh
- The new rate applies to the whole balance, not just the cash. If your current rate is low, a HELOC might cost less.
- Cash-out pricing is usually a bit higher than a rate-and-term refinance.