Cash-Out Refinance Calculator

What Is a Cash-Out Refinance?

A cash-out refinance replaces your existing mortgage with a new, larger mortgage. The new loan first pays off your current lender, and any leftover amount above that payoff arrives as cash in your bank account at closing. Because the new loan is larger, your monthly payment almost always increases; because the loan is secured by your home, the interest rate is typically lower than what you would pay on a credit card, personal loan, or student loan. Homeowners commonly use cash-out proceeds for home improvements, debt consolidation, college tuition, or to fund a business.

The most important thing to understand about a cash-out refinance is that it resets the clock on your mortgage term. If you are 12 years into a 30-year mortgage and you refinance into a new 30-year loan, you have just turned a 30-year commitment into a 42-year commitment. Even if the new monthly payment is lower (rare in 2026 because rates are well above 2020-2021 levels), the total interest paid over the life of the loan can be much higher. the cash-out refinance calculator above shows this clearly in the "Total Interest (new loan)" field.

Cash-Out Refinance vs HELOC vs Home Equity Loan

Homeowners have three main ways to tap equity. A HELOC is a revolving line of credit with a variable rate and a two-phase structure (interest-only draw, then amortizing repayment). A home equity loan is a fixed-rate second mortgage that sits on top of your existing first mortgage. A cash-out refinance replaces your first mortgage entirely with a new, larger one. The table below summarizes how they compare.

For more on each alternative, see the home equity calculator hub and the HELOC calculator.

How LTV Limits Your Cash-Out

Loan-to-value ratio (LTV) is the single most important number that determines how much cash you can take out. LTV is the new loan amount divided by your home's appraised value. Lenders set maximum LTV caps because the more equity you leave in the home, the lower their risk if you default and they have to foreclose. The caps differ by loan program:

• Conventional (Fannie Mae / Freddie Mac): 80% LTV maximum for cash-out. This is the most common program and the strictest cap.
• FHA: 85% LTV maximum. FHA cash-out requires mortgage insurance premiums (MIP) for the life of the loan, which adds 0.55% to the effective rate.
• VA: 90% LTV maximum for qualified veterans, active service members, and surviving spouses. VA charges a funding fee (2.3% for first-time use, 3.6% for subsequent use in 2026) that can be financed into the loan.

Worked example on a $500,000 home with a $300,000 current balance, no second mortgage:

• Conventional 80%: Max loan = $500,000 × 0.80 = $400,000. Max cash before costs = $400,000 − $300,000 = $100,000.
• FHA 85%: Max loan = $500,000 × 0.85 = $425,000. Max cash before costs = $425,000 − $300,000 = $125,000 (but MIP is permanent).
• VA 90%: Max loan = $500,000 × 0.90 = $450,000. Max cash before costs and funding fee = $450,000 − $300,000 = $150,000.

Subtract estimated closing costs (2 to 5 percent of the new loan) from each figure to see the actual check you would receive at closing.

Cash-Out Refinance Rates

Cash-out refinance rates run about 0.125 to 0.5 percentage points higher than rate-and-term refinance rates on the same loan. Lenders price cash-out higher because taking equity out statistically correlates with higher default risk. In the 2026 market, borrowers with credit scores of 720 or higher and LTV at or below 75% can expect cash-out refinance offers in the 6.0% to 7.5% range for a 30-year fixed; lower-credit or higher-LTV borrowers may see 7.5% to 9% or be declined. The new rate is what the cash-out refinance calculator uses to amortize the new loan; the gap between your current rate and the new rate is the single biggest driver of whether the cash-out makes financial sense. For comparison shopping on rate-and-term refinance math, see the refinance calculator.

The Break-Even Math

Break-even analysis answers a simple question: how long do you have to keep the new loan for the monthly savings (or the cash-flow benefit of the cash itself) to pay back the closing costs you financed into it. The formula is:

Break-even years = closing costs ÷ monthly savings

When interest rates have risen since you took out your original mortgage, your new rate will be higher than your old rate, so your monthly payment goes up, not down. In that case monthly savings is negative and break-even is "never" on a pure cash-flow basis. Cash-out still makes sense in this scenario only when the cash itself produces a separate return that beats the closing cost, for example:

• Paying off $50,000 of credit card debt at 22% APR. That debt costs ~$9,167/year in interest. Trading it for mortgage debt at 6.5% saves ~$7,750/year, which pays back $8,750 in closing costs in roughly 13 months.
• Home improvements that add resale value (a new roof, kitchen remodel, or addition). The ROI is measured at sale, not monthly.
• Starting or expanding a business where the expected return far exceeds the mortgage rate.

If you cannot point to a specific, higher-cost obligation the cash will retire, the cash-out refinance is almost always a worse deal than a HELOC or home equity loan that preserves your low first mortgage.

Risks and Alternatives

A cash-out refinance converts unsecured debt (or future spending) into debt secured by your home. If you cannot make the new, higher payment, you can lose the home to foreclosure. Other risks:

• Resets the mortgage clock. Years of principal paydown are wiped out when you restart a 30-year term. See our loan payoff strategies guide for ways to recover that ground.
• Higher rate than your original loan. In 2026 most homeowners are refinancing out of 3-4% loans into 6-7% loans, which doubles the interest cost per dollar of principal.
• Foreclosure risk. Pulling out the last 20% of equity leaves no cushion if home prices fall or your income drops.
• PMI can return. If your new LTV is above 80% on a conventional loan you will pay private mortgage insurance, adding 0.5% to 1.0% per year to your effective rate.

Alternatives worth comparing in the cash-out refinance calculator before you commit:

• HELOC: Lower closing costs (often $0), preserves your first mortgage, flexible draw. Best when you need intermittent access and your current rate is far below today's rate.
• Home equity loan: Fixed rate, fixed term, second-lien position. Best when you want a predictable payment but do not want to give up a low-rate first mortgage.
• Sell and downsize: If you genuinely need the equity and cannot afford the new payment, selling and buying a smaller home (or renting) may net more cash with less risk.

Worked Example: $300,000 Balance at 4.0% Refinancing to 6.5% with $50,000 Cash Out

Here is the cash-out refinance calculator's default scenario: current balance $300,000, current rate 4.0%, current P+I payment $1,432/month, new rate 6.5%, new term 360 months (30 years), cash out $50,000.

Step 1 — New principal

newPrincipal = currentBalance + cashOut = $300,000 + $50,000 = $350,000

Step 2 — Estimated closing costs (2.5%)

closingCosts = $350,000 × 0.025 = $8,750

For simplicity the cash-out refinance calculator does not roll closing costs into the principal. In reality you would finance them, which raises the new loan to about $358,750.

Step 3 — New monthly payment (amortized)

M = 350000 × [0.0054167 × (1.0054167)360] / [(1.0054167)360 − 1]

(1.0054167)360 ≈ 6.991, giving M ≈ 350000 × 0.0054167 × 6.991 / 5.991 ≈ $2,212/month.

Step 4 — Payment change

$2,212 − $1,432 = +$780/month (a 54% increase)

Step 5 — Break-even

Monthly savings is negative ($780 higher), so on payment alone the break-even is never. The refinance only makes sense if the $50,000 cash retires higher-cost debt. For example, paying off $50,000 of credit cards at 22% APR saves about $9,167/year in interest, which recovers the $8,750 in closing costs in roughly 1 year.

Step 6 — Total interest over 30 years

$2,212 × 360 − $350,000 = ~$446,320

For comparison, the remaining interest on the old 4.0% loan (assuming 25 years left at $1,432/mo) would be roughly $129,600. The cash-out refinance therefore costs about $316,720 more in lifetime interest in exchange for $50,000 of cash today.

Verify in Excel or Google Sheets

New payment: =PMT(0.065/12, 360, -350000) → $2,212.41

Total interest: =2212.41*360 - 350000 → $446,467.60

Assumptions & Limitations

• Uses a single closing cost figure of 2.5%. Real costs vary from 2% on large loans to 5% on small loans and depend on state, lender, and escrow practices.
• Treats closing costs as paid at closing from the cash out, reducing cash to the borrower. Some borrowers finance costs into the new loan instead; this raises principal and payment slightly.
• Does not model PMI on conventional loans above 80% LTV, MIP on FHA loans, or the VA funding fee. Add these to the new rate for a more accurate payment.
• Assumes the user-supplied current monthly payment is accurate. If your current payment includes taxes and insurance escrow, subtract those before entering it here.
• Does not account for tax deductibility of the new mortgage interest, which depends on how the cash is used (see IRS Publication 936).

Sources & Editorial Standards

This cash-out refinance calculator uses the standard amortization formula to compute the new mortgage payment: M = P × [r(1+r)n] / [(1+r)n − 1], where P is principal, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments. Closing costs are estimated at a flat 2.5% of the new loan amount for simplicity; real-world closings range from 2% to 5%. Break-even is computed as closing costs divided by monthly payment change (negative change means savings; positive change means higher payment and the refinance does not break even on cash flow alone).

Primary sources for cash-out refinance data and consumer guidance:

• CFPB — What is a cash-out refinance? — federal definition, consumer disclosures, and key mortgage terms.
• Fannie Mae Cash-Out Refinance Guidelines — conventional 80% LTV cap, reserve requirements, and seasoning rules.
• Freddie Mac Refinance Programs — conventional cash-out program parameters and LTV tiers.
• FHA Cash-Out Refinance — 85% LTV cap, MIP structure, and property requirements.
• VA Cash-Out Refinance — 90% LTV cap, funding fee schedule, and veteran eligibility.
• IRS Publication 936 — mortgage interest deduction rules, including the $750,000 acquisition-debt limit and qualified-use test.

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