# Cash-Out Refinance Calculator

Created by Tibor Pál, PhD candidate
Reviewed by Dominik Czernia, PhD and Steven Wooding
Based on research by
Cipra T. Financial and Insurance Formulas; 2006
Last updated: Jan 18, 2024

With the cash-out refinance calculator (or mortgage cash-out refinance calculator), you can compare your original loan with a cash-out refinance loan where the loan balance is larger, so you can take out the difference in cash.

Read further on and learn what cash-out mortgage refinance is and study what is the difference between cash-out refinance vs. home equity loans (HELOC). Furthermore, we answer some interesting questions about cash-out home refinance in the FAQ section.

Check our mortgage refinance calculator if you are interested in refinancing a mortgage loan.

## What is a cash-out refinance loan?

A cash-out home refinance loan is a financial transaction that replaces your current home loan with a new mortgage with a larger balance than your existing debt. In this way, you can take the difference in cash which you can spend on home improvements, debt consolidation, or other financial needs.

## How does a cash-out refinance work? Cash-out refinance vs. home equity loan (HELOC)

You may have different options when you are about to borrow against your home's available equity. One option is to take a cash-out mortgage refinance loan. The other option is to use a home equity line of credit (HELOC). The main cash-out refinance vs. home equity loan differences are the following:

• Loan terms

Since cash-out refinance pays off your original mortgage first by an entirely new loan, the new loan term might be very different. As a result, you can have a new payment amortization schedule, which determines the structure of the monthly payments (principal plus interest) you need to make to repay the mortgage by the end of the loan term. If you want to get familiar with the idea of amortization, check our amortization calculator, where you can learn the basics of this fundamental concept.

On the other hand, a HELOC is typically an additional loan to your existing mortgage, so it has its own term and repayment schedule distinct from the original mortgage. It's worth noting that you may also apply for an HELOC loan when your house is completely paid for, and you have no mortgage.

• How you receive the cash

In a cash-out refinance, you receive a lump sum when you close your cash-out refinance loan. Afterward, the new loan is used to repay your original mortgage, and any costs popping up during the transaction. What remains is your cash-out that you can use for what you wish.

Home equity line of credit (HELOC) allows you to withdraw from the available line of credit during your draw period, usually 10 years. Over this time, however, you'll already begin to make monthly payments. After the draw period the repayment period begins, you will continue to repay the loan but can no longer withdraw your funds. Typically, you have 20 years to repay the outstanding balance.

• Interest rates

You can take cash-out mortgage refinance with either a fixed-rate or an adjustable-rate mortgage. HELOC has a variable interest rate that moves in tandem with an index, typically the U.S. prime rate, published in The Wall Street Journal.

• Closing costs

While cash-out refinance has closing costs similar to a mortgage loan, HELOC typically has no (or relatively small) closing costs.

## How to use the cash-out refinance calculator?

After learning what a cash-out refinance is, you should be able to use our cash-out refinance calculator with no problems. If you still have any doubts, below is a short instruction how to use it:

1. Current loan

In the first section, you need to give the details of your current loan what you would like to refinance.

• Loan amount – You can give the original loan amount or the outstanding balance of the remaining loan
• Due date (advanced mode) – Set the date according to the balance previously given.
• Loan term – Remaining or the original loan term.
• Interest rate – Annual interest rate.
• Compound frequency (advanced mode).
2. Loan refinancing

In this section of the mortgage cash-out refinance calculator, you need to add the details of the new loan you use for a cash-out home refinance:

• Cash out – Set here the amount of cash you would like to take out from your equity
• New due date (advanced mode) – Date of the first payment of the new loan.
• New loan term.
• New interest rate.
• Origination fee – An upfront fee as a percentage of the new balance.
• Cost of refinancing.
• Compound frequency (advanced mode).
3. Payment summary

This section can compare the old and the new loan, which can support your decision. In addition, you can follow the progression of balances of the two loans in a chart and check the schedule of both loans.

## FAQ

Let say you took out a $150,000 mortgage to buy a house worth$200,000 and after some time you still owe $100,000. Assuming the property value has not dropped below$200,000, you have also built up at least $100,000 in home equity. If interest rates became lower, and you decide to refinance, you could potentially get approved for 100% or more of your home's value. ### Do you pay taxes on cash-out refinance? Since taking cash out from refinance is a loan and not income, you don't pay tax on it. However, you might lose certain tax deductions depending on how you use the cash. ### How much can I cash-out refinance? Typically, the maximum is 80% of your loan-to-value ratio (LTV). For example, if your house is worth$100,000, you may only be able to borrow a total loan amount of $80,000. ## Disclaimer You should consider the cash-out refinance calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive. For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice. Tibor Pál, PhD candidate Current loan Loan amount$
Loan term
yrs
Interest rate
%
Loan refinancing
Cash out
$Loan term yrs Interest rate % Origination fee % Costs of refinancing$
Payment summary
 Current loan* New loan Difference Principal $150,000.00$170,000.00 $20,000.00 Monthly payment$1,048.60 $1,169.41$120.81 Interest rate 6.5% 5.5% -1% Term 23 years 20 years 3 years Total interest $139,412.77$110,658.02 -$28,754.75 Total payments$289,412.77 $284,208.02 -$5,204.75
* The results apply for the remained part of the loan.
The cost of refinancing your current loan is \$3,550.00.
Display
Chart of balances
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