Cash-Out Refinance Calculator
See how much cash you can pull from your home equity, how it changes your monthly payment, and whether it is your cheapest borrowing option.
Is This Cash-Out Worth It?
Cash-Out Refi vs HELOC vs Personal Loan
What Is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between your old balance and the new loan amount is paid to you in cash at closing. For example, if you owe $280,000 on a home worth $450,000 and take out a new $330,000 mortgage, you receive approximately $50,000 in cash (minus closing costs). You then make payments on the new, larger mortgage going forward.
This is fundamentally different from a rate-and-term refinance, where you simply replace your loan with a new one at a better rate without borrowing additional money. With a cash-out refi, you are converting home equity into liquid cash that you can use for any purpose — though how you use it has important financial and tax implications.
LTV Requirements and Limits
Most conventional lenders require that your new loan-to-value (LTV) ratio stay at or below 80% after the cash-out. This means you need at least 20% equity remaining in your home after the refinance. If your home is appraised at $450,000, the maximum new loan would be $360,000. VA loans are more generous, sometimes allowing up to 100% LTV for eligible veterans, though most VA lenders cap at 90%. FHA cash-out refinances cap at 80% LTV and require you to have owned the home for at least 12 months. Jumbo loans (above the conforming limit) often have stricter LTV requirements of 70-75%.
When a Cash-Out Refinance Makes Sense
The strongest use cases for a cash-out refi are home improvements that increase your property value, consolidating high-interest debt (credit cards at 22% replaced by mortgage debt at 6-7%), and funding investments that are expected to earn more than the cost of borrowing. If you can simultaneously lower your interest rate while pulling cash out, you are in an especially strong position. Home improvements funded by cash-out refinance money may also qualify for the mortgage interest tax deduction, effectively reducing your borrowing cost further.
When It Does Not Make Sense
A cash-out refinance is a poor choice when you are using the funds for depreciating assets like cars, vacations, or consumer goods. You are converting 30 years of debt obligation into something that loses value immediately. It also does not make sense if you plan to sell the home soon — you will not have time to recoup the 2-5% closing costs. And if your current rate is significantly lower than what is available today, a cash-out refi forces you to give up that favorable rate on your entire balance, not just the cash-out portion.
The Term-Extension Trap
One of the most overlooked costs of a cash-out refinance is resetting your amortization clock. If you have 25 years remaining on your current mortgage and refinance into a new 30-year loan, you have added 5 years of payments. During the early years of any mortgage, the majority of each payment goes toward interest rather than principal. By starting over, you push yourself back to the interest-heavy front end of the amortization schedule. This calculator accounts for this by comparing total interest over the full remaining term of each loan, so you can see the true cost. If you can afford it, choosing a shorter term (like 20 or 25 years) on the new loan minimizes this penalty.
Tax Implications
Under the Tax Cuts and Jobs Act of 2017, mortgage interest is deductible only on debt used to buy, build, or substantially improve your home. If you take out $50,000 via cash-out refinance and use it to renovate your kitchen, the interest on that $50,000 is likely deductible. If you use it to pay off credit cards or buy a car, it is not. The deduction is limited to interest on total mortgage debt of $750,000 ($375,000 if married filing separately). Keep detailed records of how you use the funds, as the IRS may require documentation. Consult a tax professional before relying on any deduction.