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Home/Refinance/Cash-Out Refi

Pull cash out. But know what you're trading.

A cash-out refinance replaces your current mortgage with a larger one, and you pocket the difference in cash. You're not "tapping equity" — you're selling it back to yourself at interest. Sometimes that's the right move (high-interest debt consolidation, return-on-investment improvements). Sometimes it's a slow-motion mistake (vacations, depreciating purchases, emergency funds). Most marketing pages won't tell you the difference. This one will.

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What brings you here today?

Cash-Out Calculator  ·  Real Numbers

How much can you pull out, and what does it cost?

Enter your home value, current loan balance, and how much cash you want. We'll show you the maximum cash you can extract, your new monthly payment, and the true 30-year cost of that cash — the number most cash-out marketing leaves out. This is the math that determines whether cash-out is the right tool for you.

Your Home & Loan

Tell us about your file

$550,000
$200K$1.5M
$280,000
$50K$1.2M
5.875%
2.5%9.0%
$80,000
$10K$500K
7.000%
3.0%10.0%
New loan term30 years
$9,500
$2K$25K
Your Answer
CASH IN HAND

$80,000

You requested $80,000. After $9,500 in closing costs financed into the new loan, you net $80,000. New loan: $369,500 (67% LTV). Within max cash-out limits.

Equity Position · Before vs. After
BEFORE
$550,000
AFTER
$180,500 equity
Loan balance
Cash extracted
Remaining equity
CURRENT P&I
$1,656
5.875% · $280,000
→
NEW P&I
$2,458
7.000% · $369,500
PAYMENT INCREASE
$802
PER MONTH
TRUE COST OF CASH
$288,715
EXTRA OVER 30 YR
EFFECTIVE COST RATE
12.0%
PER YEAR ON CASH

Read this carefully: the "True Cost" figure is what you'll actually pay over 30 years for the cash you took out today — including the higher monthly payment, the higher rate on your entire loan, and the closing costs. Compare to your alternative. A 0% credit card balance transfer might be cheaper. So might selling stocks, even with capital-gains tax. Cash-out makes sense only when this number beats every alternative.

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Cash-out limits: Conventional 80% LTV max, FHA 80% LTV max (per 2019 HUD rule), VA cash-out can go to 90% LTV with overlays.

The Honest Question

You're not tapping equity. You're selling it back to yourself.

"Tap into your home's equity" is the marketing language of the entire cash-out industry. It makes equity sound like a faucet you turn on. It isn't.

Equity is wealth. You built it by paying down your mortgage and by your home appreciating. When you cash out, you're converting that wealth back into debt — and you're paying interest on it for the next 30 years. The cash you receive today is borrowed money, not money you "have."

Here's the test the cash-out marketing won't show you:

If I borrowed this same amount as a personal loan at the rate I'm being quoted, would I do it for this purpose?

If the answer is yes — debt consolidation, ROI-positive home improvement, business capital with a real plan — cash-out can be the right tool, because you're getting a lower rate than a personal loan and the interest may be tax-deductible (if used for the home).

If the answer is no — vacation, wedding, depreciating asset, "rainy day" cushion — then cash-out is just a personal loan dressed up in your home's clothing. Same debt. Same interest. Different (worse) consequences if you fall behind — because now your home is collateral for the vacation.

The reason it feels different is that the monthly payment is small (because it's spread over 30 years) and the cash hits your account in a single deposit. Don't trust the feel. Trust the math the calculator above shows you. That's the actual cost.

What's It For?  ·  Six Common Uses

When cash-out pays. When it doesn't.

The same $80K cash-out is a brilliant move for one purpose and a slow disaster for another. Here are the six most common cash-out uses, with honest verdicts — including the ones the lender shouldn't be cheering for.

Good use

High-interest debt consolidation

The math works when your existing debt rates are much higher than your new mortgage rate. Credit cards at 22% APR, personal loans at 14%. Even a 7% cash-out refi is a 15-point improvement.

$30K credit card @ 22% → $30K cash-out @ 7% saves ~$3,400/yr
Situational

Home improvement

Works if the project increases home value by more than the cost (kitchens, bathrooms, additions in many markets) AND interest is tax-deductible (project must be on the home itself). Doesn't work for cosmetic-only updates.

Kitchen remodel $50K → +$70K appraised value = ROI positive
Situational

College tuition

Works only if cash-out rate beats federal student loan rates (currently 5-8% for parent PLUS). Doesn't work for undergrad subsidized loans (lower rates, deferment options, forgiveness programs that cash-out lacks).

Compare cash-out rate to PLUS loan rate before deciding
Situational

Business capital

Works if you have a real revenue plan and the business will generate returns above the cash-out rate. Doesn't work as "I'll figure it out" funding. Personal home as collateral for a business idea is a serious risk — banker would call it "co-mingling personal and business credit."

Only if projected returns > 10% annually after taxes
Bad use

Vehicle purchase

Cars depreciate ~15-20% in year one. You're financing a depreciating asset over 30 years. Even at 0% auto financing, the cash-out closing costs alone make this worse than a regular auto loan. The "I'll save on interest" math is wrong.

$40K car → $40K cash-out × 30 yr = $96K paid for $5K residual value
Bad use

Vacation, wedding, "rainy day"

A two-week vacation costs $X today. Financed via cash-out at 30 years, it costs ~3× X over the loan life. "Rainy day" is similar — you're trading liquid emergency capacity (HELOC, savings) for illiquid debt that requires a refinance to access more.

$15K trip → ~$45K total cost spread over 30 years
Worked Scenarios  ·  Three Real Files

Three borrowers. Three uses. Three different answers.

Same dollar amount, three different reasons. The cash-out marketing pitch ("access your equity!") is the same in every case. The actual math is wildly different.

IScenario · N° 01Debt consolidation

Renee K.

The question: giving up a 4.25% mortgage to get a 7% mortgage looks insane. But the credit cards at 23% are bleeding her dry. Worth it?

The file
Home value
$485,000
Current loan
$220,000 @ 4.25%
Credit card debt
$42,000 @ 23% avg
Cash needed
$45,000 (debt + cushion)
New rate quoted
7.000% (cash-out premium)
Current total (mtg + CC min)
$2,343/mo
After cash-out (mtg only)
$1,762/mo
Monthly cash flow improves
$581
Annual interest savings
~$8,500
IIScenario · N° 02Lifestyle spending

Tom & Lisa W.

The question: they have plenty of equity, the lender pre-approved them, and they want to "live a little." What's the real cost?

The file
Home value
$620,000
Current loan
$310,000 @ 3.625%
Cash desired
$60,000
Use
European tour + new boat
New rate quoted
7.125%
Current payment
$1,414/mo ($310K @ 3.625%)
After cash-out
$2,549/mo ($378.5K @ 7.125%)
30-year cost of $60K cash
~$185K
Effective annual cost
~10%
IIIScenario · N° 03ROI-positive home improvement

Carlos & Diana M.

The question: they're already at 6.5% so the rate increase is small. The remodel should add more value than it costs. Cash-out, HELOC, or 203(k) renovation loan?

The file
Home value
$420,000
Current loan
$215,000 @ 6.500%
Cash needed
$75,000
Use
Kitchen + master bath remodel
Expected appraised value bump
+$95,000
New rate quoted
6.875%
Cash-out option
$293K @ 6.875% · $1,925/mo · 30yr
HELOC alt
Keep 6.5% first + $75K HELOC @ 9% var · $1,360 + $563 = $1,923/mo
Four Ways to Access Equity  ·  Side by Side

Cash-out isn't the only (or always best) option.

If your existing mortgage rate is good, replacing the whole thing to get cash is often the wrong move. Three other tools let you access equity without disturbing your first mortgage. Here's the comparison.

OptionWhen it fitsRate / costTrade-offs
Cash-Out Refi this pageReplacing your mortgage anyway (your existing rate ≥ current rates), or large amount needed (>$100K)2–3% closing costs · cash-out rate ~0.25-0.50% above rate-and-termResets amortization clock 30 years; if existing rate is below market, you give that up forever
HELOC home equity line of creditSmaller amount, flexible draws, you have a great existing first mortgage you don't want to disturb$0–$1,500 to open · variable rate (Prime + margin), often ~9% in 2026Variable rate fluctuates; usually interest-only first 10 years, then full amortization (payment shock)
Home Equity Investment HEI / Point, Hometap, UnisonYou have equity but income/credit doesn't qualify for cash-out · or you want zero monthly payment0% interest · investor takes share of future home appreciationIf home appreciates strongly, you pay back far more than you borrowed; complex contracts; not available all states
Personal Loan unsecuredSmaller amount ($5K-$50K), short-term need, want to keep home out of the equation$0 closing · 8-15% APR depending on credit · fixed term 3-7 yearsHigher rate than secured options; but home isn't collateral; payment ends in 3-7 years
Don't borrow save up insteadDiscretionary spending (vacation, luxury, "wants") · purchase can wait 12-24 months$0Requires patience; but no debt added to your largest asset
Common Questions  ·  Cash-Out Refi

Six honest answers about cash-out.

The questions borrowers actually ask — and the questions they should be asking. Some of these answers will steer you away from cash-out. That's the point.

Maximum cash-out is governed by loan-to-value (LTV) limits:

Conventional cash-out: 80% LTV maximum. So if your home is worth $500K, max loan is $400K. If you owe $250K, you can pull out $150K (minus closing costs).

FHA cash-out: 80% LTV maximum (HUD tightened from 85% in 2019).

VA cash-out: can go to 90% LTV with most lenders, sometimes 100% LTV with specific overlays — most flexible of the three.

Two important constraints: (1) you need to be able to qualify for the new, larger payment under DTI rules (typically 45-50% max), and (2) your credit score affects pricing and may restrict the LTV further (lower scores = lower max LTV).

Cash-out is statistically riskier from the lender's perspective. Borrowers who pull cash out are more likely to default than borrowers doing a simple rate-and-term refinance. Fannie Mae and Freddie Mac price loans according to default risk — cash-out gets a "Loan-Level Price Adjustment" (LLPA) of typically 0.25-0.50% in rate, sometimes more.

The premium varies by:

(1) LTV: 75% LTV cash-out has a smaller LLPA than 80% LTV cash-out.

(2) Credit score: 740+ FICO has a smaller LLPA than 660 FICO at the same LTV.

(3) Loan size: jumbo cash-out has different pricing rules from conforming.

Practical impact: if rate-and-term is 6.500%, cash-out at the same file is typically 6.875-7.250%. Run both quotes and compare.

Only if the cash is used to "buy, build, or substantially improve" the home that secures the loan. Per the 2017 Tax Cuts and Jobs Act:

If you cash out $50K to remodel the kitchen → the interest on that $50K portion is deductible (within the $750K mortgage interest cap).

If you cash out $50K to pay off credit cards or take a vacation → that interest is not deductible.

If you cash out a mixed amount, you must allocate proportionally — only the home-improvement portion qualifies.

Important caveat: this is general tax information, not advice. We are not your tax advisor. Consult a CPA before relying on the deduction in your math.

The single biggest factor: your existing first-mortgage rate.

If your existing rate is far below current rates (e.g., you have a 3.5% loan from 2020 and current rates are 7%): HELOC. Keep your low first mortgage. The HELOC will charge ~9% on just the cash you draw, which is far cheaper than refinancing the whole thing at 7%.

If your existing rate is at or above current rates: cash-out can make sense. You're going to refinance anyway to lower the rate; doing it as a cash-out adds cash for marginal extra cost.

Other considerations: HELOC has a draw period (typically 10 years interest-only, then 20 years amortizing) which can cause "payment shock" in year 11. Cash-out has stable monthly payment from day one.

Not directly — but the math gets worse if you sell soon.

The cash-out doesn't affect the home's salability. When you sell, the sale proceeds first pay off the new (larger) mortgage, and you keep what's left.

The problem: cash-out closing costs (2-3% of the new loan) plus the higher rate you accepted only pay back if you stay in the home long enough. Sell in 2 years and you've paid $9-12K in closing costs to access cash you could have gotten cheaper from a HELOC.

Practical rule: if you might sell within 3-5 years, seriously consider HELOC over cash-out regardless of your existing rate.

Cash-out refinance replaces your existing first mortgage with a new, larger one. You end up with one mortgage. Old loan paid off; new loan on the books.

A second mortgage (which includes HELOCs and home equity loans) sits behind your existing first mortgage. You end up with two loans. First mortgage continues unchanged; new second loan is added.

Why it matters:

(1) If your existing first-mortgage rate is great, cash-out forces you to give it up. A second mortgage doesn't.

(2) Cash-out has bigger closing costs (entire loan amount) than a second mortgage (only the new amount).

(3) In default, the first mortgage gets paid first from sale proceeds; the second is "junior."

HELOCs and home equity loans are types of second mortgages.

Next Step  ·  Other Refi Paths

Different goal, different refi.

Cash-out is one of five refinance options. If your situation is different, these are the right pages.

No cash needed

Rate & Term Refi

If you just want to lower your rate or shorten your term — no cash extracted — this is the cheaper path. Lower closing costs, better rate pricing.

Use this if: You don't need the cash
Rate & term details
FHA loans only

FHA Streamline

For FHA borrowers who want a simpler refi. No appraisal in many cases, no income re-verification. Note: no cash-out allowed on streamlines.

Use this if: You have FHA + want fast/cheap rate-only refi
Streamline details
VA loans only

VA IRRRL

VA's streamlined refi for rate reduction. Can't pull cash out via IRRRL — for VA cash-out you'd want a separate VA cash-out refi (90% LTV available).

Use this if: You have VA + just want lower rate
IRRRL details
Ready When You Are

Cash-out, HELOC, or let's talk first.

If you're considering cash-out, the honest first step is a 20-minute conversation with a loan officer who'll work the math both ways — cash-out vs. HELOC vs. alternatives. If cash-out isn't the right tool for your situation, we'll tell you. Sixty-second short application — no SSN, no hard credit pull yet.

Or call 800.672.9470
NMLS #1796·Lending in 50 states·Equal Housing Lender
Disclosures. All numbers on this page are estimates based on the inputs provided. Actual approval, pricing, closing costs, and maximum cash-out amount depend on automated underwriting, credit history, employment verification, property appraisal, and program-specific overlays. Cash-out LTV limits: Conventional 80%, FHA 80% (per HUD's 2019 rule), VA up to 90% with most lenders. Cash-out interest rates typically run 0.25-0.50% above rate-and-term refi rates due to Loan-Level Price Adjustments (LLPAs). By refinancing your existing loan, the total finance charges incurred may be higher over the life of the loan. Tax-deductibility of cash-out interest is governed by the 2017 Tax Cuts and Jobs Act and depends on use of funds; consult a tax advisor. Land Home Financial Services, Inc. NMLS #1796. Equal Housing Lender. Licensed in 50 states.
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