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Finance Calc Kit
Mortgages

Cash Out Refinance Calculator

Calculate maximum cash-out refinance proceeds, new monthly mortgage payments, closing costs, and net interest savings.

Current property & mortgage

$
$
%
years
Current equity:$200,000.00 (44.4%)
Current loan-to-value (LTV):55.6%

New refinance & cash-out

%
%
years

Closing costs & fee handling

%

Net cash in hand

$101,000.00

Gross cash-out: $110,000.00 − $9,000.00 closing fees

New monthly payment

$2,275.44/mo

+$816.20/mo vs current payment

New mortgage amount

$360,000.00

80.0% new LTV ($90,000.00 equity kept)

Estimated closing costs

$9,000.00

Financed directly inside new mortgage

New mortgage funds distribution

  • Existing loan payoff$250,000.0069.4%
  • Net cash proceeds$101,000.0028.1%
  • Financed closing costs$9,000.002.5%

Current loan vs New cash-out refinance

MetricCurrent mortgageCash-out refinanceNet change
Monthly principal & interest$1,459.24 / mo$2,275.44 / mo+$816.20 / mo
Mortgage principal$250,000.00$360,000.00+$110,000.00
Interest rate4.3%6.5%+2.3%
Loan term22 yrs left30 yrs+8 yrs
Loan-to-value (LTV)55.6%80.0%+24.4%
Home equity retained$200,000.00$90,000.00-$110,000.00
Total remaining interest$135,239.68$459,160.16+$323,920.48

How cash-out refinance proceeds & payments are calculated

Review the step-by-step mathematical logic for your maximum loan limit, closing costs, net cash disbursed, and new monthly payment.

  1. Determine allowable maximum new loan based on LTV

    Max Loan Amount=Home Value×Max LTV100\text{Max Loan Amount} = \text{Home Value} \times \frac{\text{Max LTV}}{100}

    With a home appraised at $$450,000.00 and a maximum allowable LTV of 80.0%, the highest permissible mortgage balance is $$360,000.00.

  2. Calculate gross cash-out equity headroom

    Gross Cash-Out=max⁡(0,Max Loan Amount−Current Balance)\text{Gross Cash-Out} = \max\left(0, \text{Max Loan Amount} - \text{Current Balance}\right)

    Subtracting your existing $$250,000.00 mortgage balance from the $$360,000.00 loan limit yields a maximum gross equity extraction of $$110,000.00.

  3. Deduct closing costs to compute net cash in hand

    Net Cash to You=New Loan−Current Balance−Closing Costs\text{Net Cash to You} = \text{New Loan} - \text{Current Balance} - \text{Closing Costs}

    Estimated closing costs of $$9,000.00 (2.5%) are financed directly into the new loan, leaving $$101,000.00 in net proceeds.

  4. Calculate the new monthly mortgage payment

    M=P×r(1+r)n(1+r)n−1M = P \times \frac{r(1+r)^n}{(1+r)^n - 1}

    Amortizing the new $$360,000.00 principal balance over 30 years (360 monthly payments) at an annual interest rate of 6.5% results in a monthly payment of $$2,275.44.

Amortization schedule

YearAnnual paymentPrincipal paidInterest paidEnding balance
1$27,305.34$4,023.81$23,281.53$355,976.19
2$27,305.34$4,293.29$23,012.04$351,682.89
3$27,305.34$4,580.82$22,724.51$347,102.07
4$27,305.34$4,887.61$22,417.73$342,214.46
5$27,305.34$5,214.94$22,090.40$336,999.52
6$27,305.34$5,564.20$21,741.14$331,435.32
7$27,305.34$5,936.84$21,368.50$325,498.48
8$27,305.34$6,334.44$20,970.90$319,164.04
9$27,305.34$6,758.67$20,546.67$312,405.37
10$27,305.34$7,211.31$20,094.03$305,194.05
11$27,305.34$7,694.27$19,611.07$297,499.79
12$27,305.34$8,209.57$19,095.77$289,290.22
13$27,305.34$8,759.38$18,545.96$280,530.84
14$27,305.34$9,346.01$17,959.33$271,184.84
15$27,305.34$9,971.93$17,333.41$261,212.91
16$27,305.34$10,639.77$16,665.57$250,573.14
17$27,305.34$11,352.33$15,953.01$239,220.81
18$27,305.34$12,112.62$15,192.72$227,108.19
19$27,305.34$12,923.82$14,381.52$214,184.37
20$27,305.34$13,789.35$13,515.98$200,395.02
21$27,305.34$14,712.85$12,592.49$185,682.16
22$27,305.34$15,698.20$11,607.14$169,983.96
23$27,305.34$16,749.54$10,555.80$153,234.43
24$27,305.34$17,871.29$9,434.05$135,363.14
25$27,305.34$19,068.16$8,237.18$116,294.98
26$27,305.34$20,345.19$6,960.15$95,949.80
27$27,305.34$21,707.74$5,597.60$74,242.05
28$27,305.34$23,161.55$4,143.79$51,080.50
29$27,305.34$24,712.72$2,592.62$26,367.78
30$27,305.34$26,367.78$937.56$0.00
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Understanding Cash-Out Refinancing

A cash-out refinance replaces your existing home loan with a brand new, larger mortgage. The difference between your new loan amount and your remaining mortgage balance, minus closing costs and lender fees, is distributed directly to you as liquid cash. Homeowners commonly leverage cash-out refinancing to fund home renovations, consolidate high-interest unsecured debts, invest in property, or cover major life expenses.

Unlike taking out a second mortgage such as a home equity line of credit (HELOC) or a home equity loan, a cash-out refinance results in a single primary mortgage with one monthly payment and a fresh amortization schedule. If you want to evaluate how an updated repayment plan affects principal reduction over time, you can also explore our amortization calculator or compare biweekly strategies using the biweekly mortgage calculator.

How Cash-Out Refinancing Is Calculated

Mortgage lenders do not allow you to borrow 100% of your property value in a standard cash-out transaction. Regulators and mortgage underwriters enforce strict Loan-to-Value (LTV) ceilings to protect both the lender and homeowner against market downturns.

1. Maximum Allowable Loan Limit

For conventional conforming mortgages backed by Fannie Mae and Freddie Mac, the standard cash-out refinance limit is 80% LTV on a single-family primary residence. FHA cash-out loans are also capped at 80% LTV, whereas VA cash-out loans can go up to 90% or 100% LTV for qualifying military service members and veterans.

Maximum New Loan=Appraised Home Value×Maximum LTV %100\text{Maximum New Loan} = \text{Appraised Home Value} \times \frac{\text{Maximum LTV } \%}{100}

2. Gross Equity Headroom

Your gross cash-out potential is the difference between your maximum permissible new loan amount and your existing mortgage balance:

Gross Cash-Out=max⁡(0,Maximum New Loan−Current Mortgage Balance)\text{Gross Cash-Out} = \max\left(0, \text{Maximum New Loan} - \text{Current Mortgage Balance}\right)

3. Closing Costs and Net Cash Proceeds

Refinancing involves standard loan origination fees, appraisal costs, title search, escrow deposits, and recording fees. Closing costs typically range from 2% to 5% of the total new loan amount. You can choose to pay these costs upfront out of pocket or finance them directly into the new mortgage:

Net Cash in Hand=New Loan Balance−Current Mortgage Payoff−Closing Costs\text{Net Cash in Hand} = \text{New Loan Balance} - \text{Current Mortgage Payoff} - \text{Closing Costs}

4. New Monthly Payment Calculation

The monthly principal and interest payment is computed using the standard fixed-rate mortgage amortization formula:

M=P×r(1+r)n(1+r)n−1M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1}

Where PP is the total new loan principal, rr is the monthly interest rate (annual interest rate divided by 1,200), and nn is the total number of monthly payments (loan term in years multiplied by 12).

Step-by-Step Worked Example

Consider a homeowner with the following financial parameters:

  • Current Appraised Home Value: $450,000
  • Remaining Existing Mortgage Balance: $250,000
  • Existing Mortgage Interest Rate: 4.25% (22 years remaining)
  • Current Monthly Payment: $1,459.24 per month
  • Maximum Allowable LTV: 80% (Conventional conforming loan)
  • New Mortgage Terms: 6.50% annual interest rate on a 30-year term
  • Closing Costs: 2.50% of the new loan, financed directly into the mortgage

Step 1: Calculate Maximum Permissible Mortgage

Max Loan=$450,000×0.80=$360,000\text{Max Loan} = \$450,000 \times 0.80 = \$360,000

Step 2: Calculate Gross Cash-Out Potential

Gross Cash-Out=$360,000−$250,000=$110,000\text{Gross Cash-Out} = \$360,000 - \$250,000 = \$110,000

Step 3: Account for Financed Closing Costs

Closing Costs=$360,000×0.025=$9,000\text{Closing Costs} = \$360,000 \times 0.025 = \$9,000
Net Cash to Homeowner=$360,000−$250,000−$9,000=$101,000\text{Net Cash to Homeowner} = \$360,000 - \$250,000 - \$9,000 = \$101,000

Step 4: Compute the New Monthly Payment

With P=$360,000P = \$360,000, monthly rate r=0.065/12=0.0054167r = 0.065 / 12 = 0.0054167, and n=360n = 360 payments:

M=$360,000×0.0054167(1.0054167)360(1.0054167)360−1=$2,275.45M = \$360,000 \times \frac{0.0054167(1.0054167)^{360}}{(1.0054167)^{360} - 1} = \$2,275.45

The homeowner walks away with $101,000 in liquid cash. Their monthly payment increases by +$816.21 per month (from $1,459.24 to $2,275.45), while retaining $90,000 (20%) in home equity.

Cash-Out Refinance vs. HELOC vs. Home Equity Loan

Before committing to a cash-out refinance, it is vital to compare all available equity monetization options:

FeatureCash-Out RefinanceHELOCHome Equity Loan
Mortgage StructureSingle primary mortgage (replaces old loan)Second mortgage (revolving credit line)Second mortgage (fixed lump sum)
Interest Rate TypeFixed or Adjustable (applies to entire balance)Variable (fluctuates with Prime rate)Fixed rate on borrowed lump sum
Impact on Existing RateOld low rate is lost; entire debt gets new ratePreserves low rate on original primary mortgagePreserves low rate on original primary mortgage
Closing CostsHigh (2% to 5% of entire loan balance)Low to zero origination costsModerate (2% to 5% of equity amount)
Best Used WhenCurrent mortgage rate is equal to or higher than market ratesYou need flexible cash drawdowns over several yearsYou have a low first mortgage rate and need a fixed sum

If you hold a very low primary interest rate (such as 3% from prior years), refinancing the entire loan balance into a higher rate can be costly over the long run. In such scenarios, calculating a combined weighted interest rate with our blended rate calculator or evaluating adjustable features with the 10/1 ARM mortgage calculator can help you determine the most cost-effective financing pathway.

Key Risks and Considerations

  • Resetting the Amortization Clock: Refinancing into a new 30-year term stretches your repayment horizon further into the future, significantly increasing total lifetime interest charges even if the monthly payment appears manageable.
  • Securing Debt with Your Home: Using home equity to consolidate unsecured credit card debt converts non-collateralized loans into debt secured by your house. If you suffer unexpected income loss, failure to pay your new mortgage puts your home at risk of foreclosure.
  • Diminished Equity Buffer: Pushing your mortgage up to the 80% maximum LTV limit leaves only a 20% equity cushion. If local housing market values decline, you could risk entering negative equity territory (becoming underwater on your mortgage).
  • Closing Fees Drag: Because closing costs are calculated on the full loan balance rather than solely on the cash-out portion, ensure the financial return on your extracted funds comfortably outpaces transaction expenses.

Frequently asked questions

What is the maximum amount of cash I can take out when refinancing?
For conventional conforming mortgages backed by Fannie Mae and Freddie Mac, the maximum loan-to-value (LTV) limit is 80% of your home appraised market value. FHA loans are also capped at 80% LTV, while VA cash-out loans allow qualifying veterans to access up to 90% or 100% of their equity depending on lender overlays.
How do closing costs work on a cash-out refinance?
Closing costs typically total 2% to 5% of the total new loan amount and encompass appraisal fees, lender origination charges, title insurance, recording fees, and prepaid escrow reserves. You can pay these costs upfront at closing or roll them directly into your new mortgage balance.
Is the cash received from a cash-out refinance taxable as income?
No. The IRS treats cash-out refinance proceeds as borrowed money, not taxable gross income. Furthermore, if you use the extracted funds for substantial capital improvements to your primary residence, the interest on that portion of the debt may be tax-deductible subject to IRS limits.
What credit score and debt-to-income (DTI) ratio do I need?
Most conventional lenders require a minimum FICO credit score of 620 to 680 for cash-out refinancing and a maximum debt-to-income ratio between 43% and 50%. FHA and VA programs may accept lower credit scores down to 580 to 620 depending on underwriting criteria.
When is a cash-out refinance better than a HELOC?
A cash-out refinance is advantageous when current mortgage market interest rates are lower than or close to your existing loan rate, when you want the predictability of a single fixed monthly payment, or when you need a large lump sum without the volatility of variable interest rates.
Are my calculations and financial inputs stored on your servers?
No. All calculations run strictly in your web browser using client-side JavaScript. None of your mortgage numbers, property values, or private financial details are ever transmitted to or stored on any remote server.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.