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A cash-out refinance is a refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing mortgage loan, and you get the difference between the two loans in cash.
For instance, if your home is worth $300,000 and you owe $200,000, you have built up $100,000 in equity. With cash-out refinancing you can receive a portion of this equity in cash. If you want to take out $40,000 in cash, this amount would be added to the principal of your new home loan. In this example, you’d get a new loan worth a total of $240,000.
Next: Know how much cash you can take out of your home.Here are the requirements that you have to meet:
If you qualify for get Cash-Out refinance, you’ll go through an application, approval and closing process (similar to when you got your original mortgage). Outlined below are the steps to get started.
Use the Cash-out Refinance Calculator to get an idea of how much cash you might have available.
Compare Cash-out Refinance quotes at least from 3 lenders before to make any decision to refinance. Compare closing cost, interest rates, new monthly payment and other lenders fees.
Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:
If your lender determines that you do qualify for Cash-Out, they will guide you through the application, approval and closing process.
Find and compare offers from multiple lenders in your state
Homeowners use cash-out refinance option for many reasons, here is a top four:
Today, most lenders limit equity borrowing to 80 percent of your cumulative loan-to-value.
For example, if your home is valued at $300,000 and you owe $200,000, then you have $100,000 of equity. At 80 percent cumulative loan-to-value, the total amount of outstanding borrowing would be limited to $240,000 ($300,000 x 0.80 = $240,000). You must retain 20 percent equity in the home, which is $60,000 ($300,000 x 0.60 = $60,000). So, subtract the amount you have to retain from your total equity, and you’d be able to borrow $40,000 ($100,000 − $60,000 = $40,000).
Tip: Use Cash-out calculator to know how much cash you able to get out from your home.
You are free to use the cash in just about any way you want. Many people use it to pay down high-interest credit card debt. Even though you’ll still owe the same amount of total debt when all is said and done, you can save a lot in monthly interest payments.
Here are some examples of common reasons for cash-out refinancing:
A cash-out refinance makes sense in a number of situations:
The process of getting approved for a cash out refinance tends to be faster than a HELOC or home equity loan. If you ask a loan officer, they'll most likely say anywhere from 30 to 45 days.
Know how much cash you able to get out from your home
Compare personalized quotes from multiple lenders in your state
Get personalized rate quotes from top lenders
If you qualify for get cash-out refinance, you’ll go through an application, approval and closing process (similar to when you got your original mortgage). Outlined below are the steps to get started.
Use the cash-out calculator to get an idea of how much cash you might have available.
Compare quotes from 3-4 lenders before to make any decision to refinance. Compare closing cost, interest rates, new monthly payment and other lenders fees.
Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:
If your lender determines that you do qualify for cash-out, they will guide you through the application, approval and closing process.
Find and compare current rates in your state.
Use the Cash-Out refinance calculator to get an idea of how much you might have available.