Compare current cash-out refinance rates

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.

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.

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.