Cash Out Refinance Calculator

Cash Out Formula:

\[ \text{Cash Out} = (\text{Value} \times \text{LTV}) - \text{Balance} \]

Cash Out Amount:

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1. What is Cash Out Refinance?

Cash out refinance is a mortgage refinancing option where the new mortgage is for a larger amount than the existing loan, allowing the borrower to access the difference in cash. This lets homeowners convert home equity into cash while refinancing their current mortgage.

2. How Does the Calculator Work?

The calculator uses the cash out formula:

\[ \text{Cash Out} = (\text{Home Value} \times \text{LTV}) - \text{Current Mortgage Balance} \]

Where:

Home Value — Current market value of the property
LTV — Loan-to-Value ratio (as decimal, e.g., 0.8 for 80%)
Current Mortgage Balance — Remaining principal on existing mortgage

Explanation: The formula calculates how much cash you can access by determining the maximum loan amount based on your home's value and LTV limit, then subtracting what you still owe.

3. Importance of Cash Out Calculation

Details: Accurate cash out calculation helps homeowners understand how much equity they can access for home improvements, debt consolidation, or other financial needs while maintaining responsible loan terms.

4. Using the Calculator

Tips: Enter current home value in dollars, LTV as decimal (e.g., 0.8 for 80%), and current mortgage balance. All values must be valid (positive numbers, LTV between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: What is a typical maximum LTV for cash out refinance?
A: Most lenders allow up to 80% LTV for conventional loans, though some may go higher with PMI or for specific loan programs.

Q2: Are there closing costs with cash out refinance?
A: Yes, expect 2-5% of the loan amount in closing costs, similar to a regular refinance.

Q3: How does cash out refinance affect my mortgage rate?
A: Rates are typically slightly higher for cash out refinances compared to rate-and-term refinances due to increased lender risk.

Q4: What's better: cash out refinance or HELOC?
A: Depends on needs - cash out refinance replaces your current mortgage with a new one, while HELOC keeps your first mortgage and adds a second lien.

Q5: Can I do cash out refinance with bad credit?
A: It's more difficult - most lenders require minimum credit scores of 620-680 for cash out refinances.