What is a cash-out refinance?

A cash-out refinance replaces your current mortgage with a larger new mortgage, and you receive the difference as cash at closing. It allows you to tap your home equity while potentially getting a new interest rate.

How much cash can I get from a cash-out refinance?

For conventional loans, you can borrow up to 80% of your home value. If your home is worth $500,000, you could have a loan up to $400,000. Subtract your current balance to find your max cash-out amount, minus closing costs.

Are cash-out refinance rates higher?

Yes, cash-out refinance rates are typically 0.125-0.375% higher than standard rate-and-term refinance rates. This is because cash-out loans are considered higher risk by lenders.

Is a cash-out refinance a good idea?

It depends on the purpose. Using cash-out proceeds for home improvements, high-interest debt consolidation, or investments that outpace your mortgage rate makes financial sense. Using it for consumption spending or when rates are much higher than your current rate is generally not advisable.

Cash-Out Refinance Guide: Tap Your Home Equity

A cash-out refinance replaces your mortgage with a larger one, giving you the difference in cash. Learn how it works, requirements, and when it makes sense.

How Cash-Out Refinancing Works

With a cash-out refinance, you replace your existing mortgage with a new, larger loan and receive the difference as cash at closing. For example, if your home is worth $500,000 and you owe $300,000, you could refinance for $400,000 and receive $100,000 in cash (minus closing costs).

80%

Max LTV (Conventional)

85%

Max LTV (FHA Cash-Out)

100%

Max LTV (VA Cash-Out)

620+

Min Credit Score

Cash-Out Refinance Requirements

Requirement	Conventional	FHA	VA
Max LTV	80%	85%	100%
Min Credit Score	620+	580+	620+ (lender)
Ownership Requirement	6+ months	12+ months	6+ months
DTI Maximum	43-50%	43-50%	41% (flexible)
Rate vs. Standard Refi	+0.125-0.375%	Similar	Similar

Best Uses for Cash-Out Proceeds

Home Improvements

The top reason for cash-out refis. Renovations that increase home value (kitchen, bathroom, additions) make this especially smart — you are reinvesting in the asset.

Debt Consolidation

Replace high-interest credit card debt (18-25% APR) with a low-rate mortgage. On $50K of card debt, this could save $500+/month. But be disciplined — do not run cards back up.

Emergency Fund

Building a cash reserve for unexpected expenses. While not ideal long-term, having 6+ months of living expenses saved provides financial security.

Education Costs

Mortgage rates are typically lower than private student loan rates. Some homeowners use equity to fund education costs, though scholarships and federal aid should come first.

Cash-Out Refinance vs. Alternatives

Option	Rate	Amount	Best For
Cash-Out Refi	Mortgage rate (+0.125%)	Up to 80% LTV	Large amounts, want new rate
Home Equity Loan	Fixed, slightly higher	Up to 85% CLTV	One-time need, keep current rate
HELOC	Variable	Up to 85% CLTV	Ongoing access, flexible draws
Personal Loan	8-20%+	$10K-$50K typical	Small amounts, no equity needed

When Cash-Out Refinancing Is NOT a Good Idea

Your current rate is lower than today's rates — you would lose a good rate to access equity
You plan to sell soon — higher loan balance means less proceeds at sale
Using cash for depreciating assets — vacations, cars, or lifestyle spending
You are already stretched thin — adding to your mortgage when finances are tight

Use our refinance calculator to estimate your cash-out scenario, or compare with home equity loans. Check today's refinance rates.

Cash-Out Refinance Explained