Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A cash-out refinance replaces the entire existing mortgage balance at whatever new rate applies, so if that new rate is higher than the original loan's rate, the borrower pays the higher rate on the full balance, not just on the newly withdrawn cash portion, a cost that's easy to miss when focused only on the cash received.
Before you rely on it
What to check
Compare the cost of paying a potentially higher rate on the entire new balance against a second lien that would only charge that rate on the smaller amount actually being borrowed.
The common error
Where people go wrong with cash-out refinance calculator
Focusing only on the cash received from a cash-out refinance without accounting for a higher rate applying to the entire new loan balance, not just the withdrawn portion. A second lien can sometimes cost less overall by isolating the higher rate to just the new borrowing.
Sensitivity evidence
How property value changes the estimated cash received
| Property value | Estimated cash received | New monthly payment | New loan amount |
|---|---|---|---|
| $440,000 | $22,000 | $2,140 | $330,000 |
| $495,000 | $63,250 | $2,408 | $371,250 |
| $550,000worked example | $104,500 | $2,675 | $412,500 |
| $605,000 | $145,750 | $2,943 | $453,750 |
| $660,000 | $187,000 | $3,211 | $495,000 |
Every input, tested
Which input moves the estimated cash received most
| Input | Tested from | To | Estimated cash received at each end | Swing |
|---|---|---|---|---|
| Property value | $495,000 | $605,000 | $63,250 to $145,750 | $82,500 (79%) |
| Current mortgage balance | $270,000 | $330,000 | $134,500 to $74,500 | $60,000 (57%) |
| Target new LTV | 73.0% | 77.0% | $93,500 to $115,500 | $22,000 (21%) |
| Refinance closing costs | $7,200 | $8,800 | $105,300 to $103,700 | $1,600 (1.5%) |
| New mortgage rate | 5.8% | 7.8% | $104,500 to $104,500 | none |
| New loan term | 22.0 years | 38.0 years | $104,500 to $104,500 | none |
Two variables at once
Estimated cash received by property value and current mortgage balance
| Property value \ Current mortgage balance | $240,000 | $300,000 | $360,000 |
|---|---|---|---|
| $440,000 | $82,000 | $22,000 | $0.00 |
| $495,000 | $123,250 | $63,250 | $3,250 |
| $550,000 | $164,500 | $104,500 | $44,500 |
| $605,000 | $205,750 | $145,750 | $85,750 |
| $660,000 | $247,000 | $187,000 | $127,000 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Property value | $550,000 |
| Current mortgage balance | $300,000 |
| Target new LTV | 75.0% |
| New mortgage rate | 6.8% |
| New loan term | 30.0 years |
| Refinance closing costs | $8,000 |
| Estimated cash received | $104,500 |
| New monthly payment | $2,675 |
| New loan amount | $412,500 |
Where the inputs come from
Property value should be an appraisal or a conservative estimate, since lenders lend against appraised value. Current balance comes from your statement. Target new LTV is the share of value the lender will lend; many cash-out programs cap at 80%. The new rate is generally higher than a rate-and-term refinance. Refinance costs include appraisal, title and lender fees.
Using the estimated cash received in a real decision
A HELOC or home equity loan may leave your first mortgage rate untouched.
When the result stops applying
Cash-out refinances reset the loan term and typically carry a higher rate than plain refinances. Investment properties and manufactured homes have lower LTV caps. Using the cash for spending rather than improving the home adds debt without adding value, and interest deductibility depends on how the funds are used.
What to compare it with
Consider what the cash is for. Using it to improve the home or to retire higher-rate debt can make sense, while using it to fund consumption adds debt against your home. Compare with a HELOC or a home equity loan using those calculators, and with the mortgage refinance calculator if you only want a lower rate. Check the total interest, since spreading the cash over 30 years increases it.
People also ask
Frequently asked questions
Is a cash-out refinance better than a HELOC?
It replaces your first mortgage, so a low existing rate is lost. A HELOC leaves it in place.
How much cash can I take out?
Cash received is the new loan amount, which the lender sets at a percentage of the property's value, minus your current mortgage balance and the closing costs. On the example, that leaves roughly $104,500 from a $412,500 new loan.
Are cash-out rates higher?
Cash-out refinances usually carry a slightly higher rate than a plain rate-and-term refinance, because lenders see more risk in a larger loan against the same property. Ask for both quotes so you can see what the cash costs.