Cash-Out Refinance Calculator

This calculator works out how much cash you can take from your home's equity by refinancing, and what that money costs. It sizes the new loan at the maximum loan-to-value (LTV) ratio you enter, deducts your current mortgage balance and closing costs, and shows the new principal-and-interest payment, how much it rises from today's payment, total interest over the new term and the equity you keep.

Homeowners use cash-out refinances to fund renovations, consolidate higher-rate debt or cover large expenses. The new loan replaces your existing mortgage entirely, so the new rate applies to the whole balance, not just the cash you take. If your current rate is well below today's rates, a HELOC or home equity loan may be cheaper because it leaves the original mortgage in place.

The calculator assumes you borrow the full amount the LTV allows. To take less, lower the LTV until the cash figure matches what you need. Payments exclude property tax, insurance and any mortgage insurance.

The payment uses the standard fixed-rate amortization formula. Closing costs are assumed to be paid out of the loan proceeds, which is how most cash-out refinances work; if you pay them in cash instead, add them back to the cash figure.

Maximum LTVs come from the loan program: Fannie Mae and Freddie Mac conventional cash-out loans and FHA cash-out loans are generally capped at 80% for a primary home, while VA cash-out loans can go higher for eligible borrowers. Investment properties and second homes usually have lower limits.

These are common program maximums for a one-unit primary residence. Individual lenders can set lower limits, and your credit score, debt-to-income ratio and the property type all affect what you are offered.

The payment increase is not the whole story. Two things often make a cash-out refinance costlier than it looks:

• Resetting the clock: if you have 22 years left on your current loan and refinance into 30 years, you pay interest for 8 extra years on the original balance as well as the new cash.
• Repricing the old balance: the new rate applies to the entire loan. Replacing a 3.5% mortgage with a 6.75% one costs you on the $260,000 you already owed, not just the $110,560 you take out.

A quick test: divide the payment increase by the cash received. In the default example, $1,010.62 a month for $110,560 is about $9.14 per $1,000, a higher monthly cost per dollar borrowed than a new 6.75% 30-year loan alone would carry (about $6.49 per $1,000), because the new loan also finances the closing costs and reprices the old balance.

• Equity left: most programs require you to keep at least 20% equity after the cash-out (the 80% LTV limit).
• Seasoning: lenders usually require you to have owned the home, or held the existing mortgage, for a minimum period, often 12 months.
• Debt-to-income: the higher payment counts toward your debt-to-income ratio, which must stay within the lender's limit.
• Tax deduction: under current federal rules, interest on the cash-out portion is only deductible if the money is used to buy, build or substantially improve the home securing the loan (IRS Publication 936). Interest on cash used for cars, tuition or card debt is not deductible.

Get quotes from more than one lender and talk to a tax or financial adviser if the cash is for anything other than the home itself.