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In the table below, you can see today’s cash-out refinance rates and add the cash-out amount you’re seeking. These personalized rate quotes are free and won’t impact your credit.
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With a cash-out refinancing loan, you take out a new home loan and use it to pay off your existing mortgage. The new mortgage is for a larger amount than the old one and it likely has a different mortgage interest rate, minimum monthly payment, and repayment term.
After the cash-out refinance mortgage is used to pay off your current mortgage, any remaining funds left over are issued to you as a lump sum. You can use the money for home improvements, debt consolidation, or for financing your child’s education. This is another alternative to other lines of credit, like home equity loans or HELOCs.
What Is a Mortgage Rate and How Do They Work?
One of the best reasons for a cash-out refinance is to consolidate high-interest debt — such as credit card debt. With a cash-out refi, you can use the lump sum payment to pay off your debt, while also potentially securing a lower interest rate on your mortgage.
You may also choose to use your funds for home improvements to increase your property value and quality of life.
This loan option is generally better than a home equity loan or a home equity line of credit (HELOC) when you can improve the interest rate or monthly payment for your entire mortgage. For example, if your refinance rate is at least 1% lower than your existing rate, a cash-out refinance might make financial sense.
Most lenders require you to retain at least 20% equity in your home, so the most you can get is 80% of your home’s total value, minus whatever you still owe on your mortgage.
For example, if you have a home worth $300,000 and owe $100,000 on your mortgage, you have $200,000 in equity. If that’s the case, the maximum you can borrow with a cash-out refinance loan is $240,000 — $100,000 to pay off your existing loan plus $140,000 in cash out.
You’re only eligible for a cash-out refinancing loan if you have equity in your home. Your equity is the value of your home minus the current balance of your mortgage. If you own a $250,000 home and you owe $100,000, your home equity is $150,000.
How to Pay Off Debt With a Home Equity Loan
If you’re thinking about applying for a cash-out refinance mortgage to free up cash flow for home repairs or a major purchase, be sure to compare offers from multiple lenders to ensure you get the best cash out refinance rates.
Home refinance rates rise and fall on a daily basis with changing economic conditions, central bank policy decisions, and investor sentiment. The table below shows recent trends in home refinance rates.
General Information and Rate Disclosures:
The listings that appear on this page are from companies that pay Credible compensation. This table does not include all companies or all available products. Displayed information is valid as of Sep 26, 2022 and assumes a customer with a 740 credit score borrowing a conventional loan for a single-family, primary residence, at or near zero discount points, and a 80% loan-to-home-value ratio. For products indicated as a jumbo (e.g. 30-year fixed jumbo rate), displayed information follows the same assumptions as a conventional loan but set at loan above the conforming limit.
The IP address of the customer accessing this page has been used to determine which U.S state should be used for pricing. In states where Credible does not have a license, we are providing information about rates available in a nearby state. If you are viewing this page from an IP address in one of the states where Credible is not licensed, the rates displayed above are for consumers located in the neighboring state shown below:
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Rates, payments, and all information displayed are for informational purposes only and are subject to change without notice. This is not a credit decision or commitment to lend. Mortgage rates and terms you may qualify for depend on your individual financial circumstances.
All monthly payment amounts above assume on time monthly payments each month for the full duration of the loan term (e.g. 360 monthly payments for a 30 year loan). Displayed monthly payment amounts do not include amounts for property taxes and hazard insurance. Your actual monthly payment obligation will be higher. Amounts for borrower-paid mortgage insurance premiums are included in the monthly payment if (1) the loan amount is below the “conforming thresholds” set by Fannie Mae and Freddie Mac, and (2) the loan-to-home-value ratio is greater than 80%; mortgage insurance premiums are excluded from the monthly payment if either the loan amount is above the conforming thresholds or the loan-to-home-value ratio is less than or equal to 80%. Your actual payment obligation may be higher. “Conforming thresholds” depend on the county where the property is located.
The APRs displayed above incorporate estimates of loan costs and closing costs you may pay in connection with a mortgage transaction with the assumptions above. This includes fees the lender charges, including points and underwriting fees, and third party services the lender does not let you shop for such as a flood certification fee. It does not include title charges, recording costs, prepaids, initial escrow deposit, and other fees.
Variable rate products, such as ARMs, have interest rates that can change over the life of the loan. Changes in the interest rate will cause required payment amounts to change.” The displayed rate and payment will be in effect for the number of years in the product’s description (e.g. 5/1 ARM means the initial rate and payment are in effect for 5 years, 7/1 means they are in effect for 7 years, etc.), after which the rate and monthly payment will change every 12 months.
Displayed rates are available through Credible Operations, Inc., NMLS #1681276
Last updated on Sep 26, 2022. These rates are based on the assumptions shown here. Actual rates may vary.
Cash-out refinancing closing costs can vary by location, but in general, you should expect to pay 2% to 3% of your loan amount.
If you’re applying for a $100,000 cash-out refinancing loan, you should plan to pay as much as $3,000 in closing costs.
How to Refinance Your Mortgage in 6 Easy Steps
CALCULATORS & TOOLS
How a cash-out mortgage refinance works
Cash-out refinancing allows you to take money out of your home equity by refinancing your current mortgage for an amount that is greater than your existing loan and the refinancing loan’s closing costs. Find out more about how a cash-out refinance works.
How to refinance your mortgage
Refinancing your mortgage can be much simpler than the process you went through when you bought your home. Here’s how to refinance your mortgage — and everything you need to know before you do.
When to refinance your mortgage
If you own a home, it’s a good idea to reassess your mortgage periodically to see if you can find a better deal elsewhere. Check out some of the reasons refinancing your mortgage could be a good idea.
How to get the best mortgage refinance rates
You really have to do your research if you want to get the best mortgage refinance rate. We’ll take some of the burden off you by doing most of the legwork so you can find the best rate for your situation.
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.
Cash-out refinances usually have higher rates than a traditional refinance as lenders often see these loans as riskier since the loan amounts are larger. There also isn’t as much available equity for collateral if you default.
Your rates for a cash-out refinance can be approximately 0.125% and 0.25% higher than a no cash-out refinance. However, several factors including your credit score, loan-to-value (LTV) ratio, and closing costs can also impact your new loan’s annual percentage rate (APR).
There isn’t publicly available historical data for cash-out loans, but you can compare 15-year mortgage refinance rates to get a fair estimate.
The lowest 15-year refinance rate by monthly average was in August 2021 at approximately 2.15%, according to historical data from Freddie Mac.
It’s always an excellent idea to compare refinance rates from several lenders to make sure you get the best loan terms. Credible can help you find the best refinance options in a matter of minutes without affecting your credit score.
A good cash-out refinance rate is typically at least 1% below your current rate. This sort of rate drop would translate into significant interest savings over the life of the loan. However, depending on your cash-out sum and your new loan balance, you may also benefit even if your rate is only 0.50% or 0.75% lower.
Your new mortgage rate depends largely on these two factors:
Credit score: Homeowners with a credit score in the mid- to high-700s and above tend to qualify for the lowest rates.
Loan-to-value ratio: Strive to keep your LTV ratio below 80% of your appraisal value. By doing this, you stand a better chance to qualify for the loan and won’t have to pay private mortgage insurance (PMI). Borrowing less equity may also lower your rate.
Cash-out refinances tend to have lower interest rates than second mortgage products like home equity loans and HELOCs.
Home equity loan rates vary by lender, but you may end up with a rate that’s 1% to 3% higher than what you’d find on a cash-out refinance, depending on your loan amount, repayment term, and other personal factors.
Second mortgages only place a lien on your current mortgage which means the lender only receives compensation during a default after your first mortgage is paid off. As a result, home equity loan and HELOC rates can be higher to hedge against this risk.
Here’s an example of what your costs might look like with each loan type. The example below assumes a 15-year repayment term with a $200,000 mortgage principal, an $80,000 equity lump sum, and a $350,000 home appraisal value.
Since you’re still responsible for paying off the original mortgage, the home equity loan and HELOC calculations also include a $1,454 monthly payment and a 3.75% interest rate on the existing $200,000 home loan balance with 15 years of remaining payments.
|Loan type||Cash-out refinance||Home equity loan||Home equity line of credit|
|Refinance Interest rate||2.75% fixed||4.50% fixed (3.75% fixed on the first mortgage)||4.00% variable (3.75% fixed on the first mortgage)|
|Closing costs (2%)||$5,600||$1,600||$1,600|
|Monthly payment (principal and interest only)||$1,900|
|Total interest costs||$62,025|
It’s also important to note that you may be able to deduct the interest paid on your cash-out refinance if you use the funds to improve your home.
Market conditions are the most influential factor in determining current rates. In general, rates are lower during a weak economy but tend to be higher when an economy is strengthening or there is strong demand for refinancing.
Some factors that you can optimize to get a competitive rate include:
Credit score: Lenders consider a score in the mid- to high-700s to be excellent credit.
Debt-to-income (DTI) ratio: An ideal DTI ratio is 36% or less. Paying off credit card debt is one way to reduce this ratio and demonstrate you can afford your new monthly payment.
Repayment term: Repayment periods as short as 10 years tend to have the lowest APR but higher monthly payments. Consider a 15-year or 20-year term for a more affordable monthly payment.
Conforming loan limits: If you live in an expensive area and your loan amount exceeds the Federal Housing Finance Agency’s (FHFA) conforming loan limits, you’ll need to apply for a jumbo loan. Lenders assume more risk with a jumbo loan, and they come with higher closing costs.
Closing costs: You may be able to roll some of your lender fees into your loan balance. However, this decision will likely increase your rate.
Discount points: Purchasing discount points can reduce your APR. This upfront expense may be worth it if you plan on living in your house for several years and can break even on the initial cost.
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