Cash Out Refinance Guide

Cash Out Refinance Guide

Here’s everything you need to know about a cash-out refinance: What it is, how it works, and the answers to some frequently asked questions.

What is a cash-out refinance?

A cash-out refinance is a refinance that allows homeowners to use the equity in their home to pay off their existing mortgage and at the same time take out cash proceeds for other purposes. 

How does it work?

The process of refinancing a mortgage typically takes two to four weeks, depending on the program that works best for the specific situation. The cash is immediately available upon the funding of the refinance. The cash received from this type of refinance will depend on the amount of equity you have in your home.

The application process involved in a cash-out refinance is just like a regular rate and term refinance, except that you end up with cash in hand at closing. The cash comes from a percentage of the difference between what you owe on the old mortgage and the current appraised value. When you refinance your mortgage, you may have closing costs that are added into the loan balance (not out-of-pocket) depending on the rate you choose.

To calculate the amount of cash you’ll get, simply take the difference between your current mortgage balance and the new loan amount. For example, if you’re refinancing a current mortgage with a $150,000 balance to a new $200,000 mortgage and the home is appraised $250,000, your loan to value is 80% and cash proceeds would be $50,000 less any costs. 

If you have greater than 20% equity in your home and can use cash to pay off high interest debt or do home improvements, then a cash-out refinance could be a good option to consider.

Frequently asked questions

Q. How will I know if a cash-out makes financial sense for my situation?

After a review of your financial situation, a review of your current mortgage and financial goals, we can provide you with a no obligation analysis. So, contact us today!

Q. How long will it take to get the cash?

Typically, a cash out refinance will be completed in under 30 days. At closing you will receive your cash.

Q: What if I do not qualify for a cash-out refinance?

If you don’t qualify, you can always consider whether a rate and term refinance makes sense. Otherwise, if you choose not to refinance at all, you just stay with your current loan without incurring any costs for withdrawing your application.

If you still have questions, call, text, or email us. We are happy to help you with your financial needs.