Increase home value before appraisal
Do inexpensive fixes (paint, landscaping, minor repairs) that immediately boost the value, leading to a higher appraisal and more cash out.
Cash-Out Refinance: Convert Home Equity to Cash
Tap into your home's value. Fund your future goals. Build financial power.
What is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new, larger loan and gives you the difference in cash at closing. You’re not taking out a separate loan; you’re refinancing your entire mortgage into a new one that reflects your home’s current value, not just what you originally borrowed.
For example, if your home is worth $400,000 and you owe $200,000, you have $200,000 in equity. A cash-out refinance could let you borrow up to $320,000 (80% LTV), pay off your existing mortgage, cover closing costs, and receive the remaining balance as a lump sum of cash.
For example, if your home is worth $400,000 and you owe $200,000, you have $200,000 in equity. A cash-out refinance could let you borrow up to $320,000 (80% LTV), pay off your existing mortgage, cover closing costs, and receive the remaining balance as a lump sum of cash.
Your new mortgage is larger than your current loan balance.
The new loan immediately pays off your old mortgage and all closing costs.
The remaining difference is wired to your bank account as a lump sum of cash at closing.
Benefits of Cash-Out Refinancing
Deciding refinance with cash out is a strategic move, often allowing you to borrow money at a lower interest rate than high-interest credit cards or personal loans. The benefits are significant and can lead to a major financial reset.
Smart Debt Consolidation
Use a cash-out refinance to pay off high-interest debt, replacing it with a single lower-interest mortgage payment.
Fund Major Home Improvements
Use the cash to remodel your kitchen, add a room, or build a new deck, improvements that can increase your home’s value further.
Lower Overall Interest Costs
Mortgage interest rates are typically lower than consumer debt, and repayment terms are longer, reducing monthly cash pressure.
Get a Lump Sum for Large Expenses
Use cash-out refinance proceeds for college tuition, wedding, medical expenses, or other major one-time costs.
Simplify Your Finances
Combine multiple debts into one easy, predictable monthly payment with a cash-out refinance.
Cash-Out Refinance Loan Types
The option to refinance cash out is available across several major loan programs, depending on your current mortgage type and your financial profile. We will help you select the best program to maximize your cash-out amount and minimize your total cost.
Conventional Cash-Out Refinance :
A standard option for borrowers with strong credit, allowing cash out up to 80% of home value.
FHA Cash-Out Refinance :
Offers more flexible credit requirements and lets you borrow up to 80% of your home’s appraised value.
VA Cash-Out Refinance :
Allows eligible Veterans to take cash out up to 100% of their home value, the most powerful cash-out option available.
Jumbo Cash-Out Refinance :
Designed for high-value properties requiring loan amounts above conventional conforming limits.
Non-Conforming Cash-Out Refinance :
Created for borrowers with unique financial profiles, such as recent self-employment or non-traditional income.
Cash-Out Refinance Requirements
Securing a cash-out refinance loan requires meeting specific underwriting guidelines. While every application is reviewed individually, below are the common requirements across most programs.
Credit Score
A 620 or higher credit score is required for most programs. A score of 680+ unlocks better rates.
Maximum Loan-to-Value (LTV)
Most programs cap the new loan at 80% of your home’s appraised value, preserving 20% equity. VA loans allow up to 100% LTV.
Debt-to-income (DTI)
Your DTI ratio should be under 43%. This ensures you can comfortably handle the new mortgage payment alongside existing debts.
Residency requirement
You must have owned and occupied the home as your primary residence for at least 12 months.
Cash reserves
We typically want to see 2–6 months of mortgage payments in liquid reserves after closing.
Property seasoning
The property must have been owned for a minimum of 6–12 months from the original purchase date.
How Does a Cash-Out Refinance Work?
Getting a cash-out mortgage refinance is a transparent and streamlined process. Our loan officers specialize in local markets, ensuring you get maximum cash while securing competitive terms.
Determine your cash goal :
Estimate your home’s current value and how much equity you’ve built.
Submit your application :
We collect your income, assets, employment history, and existing mortgage details to pre-qualify you.
Home appraisal and title review :
A licensed appraiser establishes the official property value, which determines your maximum loan amount.
Underwriting and final approval :
Our underwriting team reviews your full file, confirms eligibility, and issues a clear-to-close.
Closing and funding :
You sign the Closing Disclosure. After the rescission period funds are wired to your account.
Tips to Maximize Your Cash-Out Refinance Benefits
1
Calculate your break-even point
Divide your closing costs by your monthly savings (if consolidating debt) to see how long it takes for the refinance to justify the expense financially.
2
Minimize debt-to-income (DTI)
Aggressively pay down non-mortgage debts, especially high-balance credit cards, in the months leading up to your application.
3
Lock your rate strategically
Discuss with your Rize Mortgage loan officer the best time to lock your rate and complete the appraisal with the favorable rates.
4
Use the funds wisely and quickly
If consolidating high-interest debt, pay off those creditors immediately after receiving the cash to avoid late payments.
5
FAQ (Frequently Asked Questions)
Is a Cash-Out refinance taxable?
The money you receive from a cash-out refinance is not considered taxable income. Since the funds are loan proceeds, not earnings, they aren’t subject to federal income tax. However, how you use the money may affect tax benefits. If you use cash for home improvements, you may be able to deduct the mortgage interest. Using it for personal expenses like debt consolidation generally doesn’t qualify.
How much can you cash-out refinance?
The amount you can cash out depends on your home equity, credit profile, and loan type. Most conventional loans allow borrowing up to 80% LTV (loan-to-value). FHA cash-out refinances allow up to 80%, while VA loans can go up to 100% LTV for eligible veterans. USDA loans don’t currently offer a cash-out option.
Does a cash-out refinance change your interest rate?
Yes. A cash-out refinance replaces your old mortgage with a new one, which comes with a new interest rate based on current market conditions and your credit profile. Rates on cash-out refinances are usually slightly higher than rate-and-term refinances because lenders assume more risk. Depending on when you originally locked your rate, your new rate could be higher or lower than what you’re currently paying.
How to get a cash-out refinance with bad credit?
It is possible, but more difficult to qualify for a cash-out refinance with bad credit. Most programs require a minimum 620 credit score, but FHA cash-out refinances may allow approval with scores as low as 580. Expect stricter conditions, such as higher interest rates or lower maximum cash-out limits. Demonstrating steady income and a low DTI ratio can improve your chances significantly.
How much does it cost to refinance a mortgage?
Closing costs for a cash-out refinance typically range from 2% to 5% of the new loan amount — roughly $6,000 to $15,000 on a $300,000 loan. These include the appraisal, lender origination fees, title services, and prepaid items like taxes and insurance. You can often roll these costs into the new loan balance rather than paying them upfront, though that increases your total loan amount.
Ready to Access Your Home Equity?
Pre-qualify in minutes or speak with a local Rize Mortgage loan officer to create a tailored plan that puts your home's equity to work for you.
