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Should you do a cash-out refinance?

A cash-out refinance allows you to use the equity you have built up in your home and turn it into cash. You’ll take out a new loan for more than you owe on your current mortgage, and the lender will provide the difference to you in cash at closing.

This calculator can help you determine if a cash-out refinance is right for you, as well as how much money it might offer given your current situation.

Cash out calculator


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Shop around for a great cash-out refinance rate through Credible.


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Learn more about cash-out refinancing

Written by Chris Jennings

As a Credible authority on mortgages, Chris Jennings covers topics including home loans and mortgage refinancing. His work has appeared in Fox Business and GOBankingRates.
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How to use our cash-out refinance calculator

Our cash-out refinance calculator will reveal a few things: How your old loan payment compares to your new one, how much interest you’ll pay over time, and the point at which you’ll break even on the costs of refinancing (that is, when you’ll start saving more than you spent). It’ll also indicate how much cash you can access with your loan as well as your loan-to-value ratio.

To use the calculator, you’ll need the following information:

Current loan information

  • Original loan amount: The amount you borrowed when you initially took out your loan.

  • Original loan term: Your loan’s repayment period, expressed in years.

  • Current interest rate: How much you pay in interest on your loan. You should be able to find it on your original loan estimate or closing papers if you’re not sure.

  • Remaining term: How many years you have left in your repayment period, expressed in years.

Proposed loan information

  • New interest rate: How much you’ll pay in interest on your new loan. If you’re not sure what your new rate will be, use Credible to see refinance rates from several lenders at once.

  • New loan term: Your new loan’s repayment period, expressed in years.

  • Cash-out refinance: Indicate whether or not you’ll be doing a cash-out refinance by expanding the “See/edit advanced options” field and toggling the cash-out refinance button. You’ll also need to enter your home’s estimated value in the next field.

  • Home value: Your home’s current value. In many cases, your lender will ask you to get a home appraisal to determine the value of your home before approving your new loan.

  • Closing costs: Total amount of closing costs you’ll pay with the new loan. Mortgage closing costs can range from 2% to 5% of the loan amount, averaging about $5,000.

What is a cash-out refinance?

Cash-out refinancing replaces your existing mortgage loan with a new one — this time with a higher balance than what you previously owed. The new loan is used to pay off your existing one, and you’ll receive a cash payment for the difference. You can then use the excess funds to spend on home improvements, pay tuition or medical bills, or cover other expenses.

For example: Say you owed $150,000 on your existing mortgage. If you did a cash-out refinance and took out a new loan of $200,000, you’d get the $50,000 difference back in cash.

Learn more: How to Refinance Your Mortgage in 6 Easy Steps

Ready to take the next step? Takes less than 3 minutes.

Pros and cons of cash-out refinancing

The big advantage of opting for a cash-out refinance over a traditional mortgage refinance is that it offers a lump sum payment, which you’re free to use as needed. If you’re facing high medical bills, a child’s college tuition, or just emergency expenses, it could help you cover those costs.

Because rates for a home refinance are typically lower than rates on other forms of financing (personal loans and credit cards, for example), cash-out refinancing can also be a smart way to pay off other debts. Paying off all these other debts might also help your credit score.


  • Offers a lump sum payment

  • Funds can be used for anything

  • Can help you pay off other debts

On the downside, taking out a large mortgage loan typically means making a higher payment and paying more in long-term interest costs. It will also take you longer to pay off in most cases.

Refinancing also comes with closing costs. These typically clock in around 2% to 5% of your total loan balance, or about $5,000 to $12,500 on a $250,000 mortgage.


  • Might result in a higher payment and more interest

  • Might take you longer to pay off

  • Uses your home as collateral, which puts it at risk if you can’t make payments

When it makes sense to cash-out refinance

Cash-out refinancing isn’t right for every homeowner, but there are some scenarios when it might make sense, like when:

  • You need an infusion of cash to cover an expense. If you’re expecting a big bill, a cash-out refinance can be a smart move to explore — especially if you know you have a lot of equity in the property or its value has improved since you bought it. This can also be a much cheaper option than a personal loan or credit card, which come with far higher interest rates.

  • You have high-interest debts you want to pay off. Credit cards, personal loans, and car loans typically carry higher interest rates than mortgage loans, so if you have some of these debts to your name, a cash-out refinance could help. For one, it might reduce the overall interest you pay across the debts over time. It also will consolidate your payments (meaning you’ll only make one monthly payment to the new mortgage, not all the other debts, too).

  • You’re using it to improve your house. A cash-out refinance can be a savvy way to cover the costs of home renovations. First, it keeps you from relying on higher-interest options. Additionally, it allows you to use the equity you’ve built up and essentially reinvest it in the home. As long as the renovations you choose actually add value to your property, the refinance might pay for itself in the long run.

Tip: Cash-out refinancing isn’t a smart move if home values are dropping in your area. If you take out a larger-sized loan and your property’s value falls below that number, it would put you upside down on your mortgage. That means you’ll owe more on the house than it’s currently worth. You wouldn’t be able to sell the property without owing your mortgage lender extra cash.

Compare multiple lenders first

Before you refinance your home, be sure to shop around. Use Credible to compare both 30-year fixed refinance rates and 15-year fixed refinance rates from our partner lenders to ensure you’re getting the best deal. This is especially important if you’re refinancing with bad credit.