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 Mortgage Refinance?
A Cash-Out Refinance is a powerful financial tool that replaces your existing mortgage with a new, larger loan, allowing you to convert a portion of your home's equity into liquid cash. It’s an excellent strategy for homeowners who have built up significant home value over time and want to use that equity for major expenses, such as debt consolidation or home improvement.
You get a new mortgage that is larger than what you currently own.
The new loan immediately pays off your old mortgage and all closing costs.
The remaining difference is given to you as a lump sum of tax-free cash at closing.
Benefits of Cash-Out Refinancing
Deciding to 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 loan.
Fund Major Home Improvements
Use the cash to remodel your kitchen, add a room, or build a new deck.
Lower Overall Interest Costs
Interest rates are usually lower, and the repayment terms are longer compared to most consumer debt.
Get a Lump Sum for Large Expenses
Use cash-out refinance for things like college tuition, wedding, or medical expenses.
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. Here are common ways homeowners get a cash-out mortgage refinance:
Conventional Cash-Out Refinance :
A standard option for borrowers with strong credit, allowing cash up to 80% of home value.
FHA Cash-Out Refinance :
Offers more flexible credit and lets you borrow up to 80% of your home’s value.
VA Cash-Out Refinance :
Allows eligible Veterans to take cash out up to 100% of their home value.
Jumbo Cash-Out Refinance :
Designed for high-value properties needing loan amounts above conventional limits.
Non-Conforming Cash-Out Refinance :
Created for borrowers with unique finances, such as recent self-employment or non-traditional income.
Cash-Out Refinance Requirements
Securing a cash out refinance loan requires meeting specific underwriting guidelines to ensure your investment is protected. While every application is reviewed individually by Rize Mortgage, here are the common requirements.
Credit Score
We require a credit score of 620 or higher for a cash-out, which is usually a bit higher than a basic rate and term refinance due to the added risk.
Maximum Loan-to-Value (LTV)
Most programs limit the new loan amount to 80% of your home's value (80% LTV). This ensures you keep at least 20% equity in the property after closing.
Debt-to-income (DTI)
Your DTI ratio should ideally be under 43% to show you can handle the new, higher mortgage payment along with your existing debt obligations.
Residency requirement
You typically must have owned and occupied the home as your primary residence for at least 12 months to be eligible for the program.
Cash reserves
Rize Mortgage likes to see enough liquid funds left over after closing to cover a few months of the new mortgage payment, depending on the loan amount.
Property seasoning
The property must have been owned for a minimum period (e.g., 6 months to a year) from the initial purchase.
How to Get a Cash-Out Mortgage Refinance with Rize Mortgage
Getting a cash-out mortgage refinance with Rize Mortgage 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 :
Use our Cash Out Refinance Calculator to estimate your home's current value.
Start your application :
We gather your income, assets, and existing mortgage details to pre-qualify you.
Home appraisal and title review :
We order a professional home appraisal to officially establish the property's value.
Underwriting and final approval :
Our underwriting team reviews your application, confirms eligibility, and issues final approval.
Closing and funding :
You sign the Closing Disclosure, and the cash-out funds are wired directly to your bank 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 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. For example, 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 may allow up to 80%, while VA loans can go up to 100% LTV for eligible veterans. USDA loans don’t currently offer cash-out options.
Does a Cash-Out Refinance Change Your Interest Rate?
Yes, a cash-out refinance replaces your old mortgage with a new one, which often comes with a different interest rate. Rates on cash-out refinances are usually slightly higher than rate-and-term refinances because lenders take on more risk. Depending on market conditions and your credit score, you may still secure a lower rate than your current mortgage. This can be beneficial if you’re also looking to reduce monthly payments.
How to Cash-Out Refinance with Bad Credit?
It’s possible, but more difficult, to qualify for a cash-out refinance with bad credit. Lenders generally require higher credit scores for cash-out loans, but FHA loans 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 debt-to-income (DTI) ratio can improve your chances.
How Much Are Closing Costs on a Cash-Out Refinance?
Closing costs for a cash-out refinance are usually a small percentage of the total loan amount. These costs can include appraisal, lender fees, title services, and other related charges. Instead of paying these expenses upfront, some lenders may let you add them to your new loan balance.
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.
