Cash-Out Refinance: Turn Home Equity Into Available Funds
Cash-Out Changes Your First Mortgage
What Is a Cash-Out Refinance?
A cash-out refinance replaces an existing mortgage with a new mortgage for a larger eligible principal balance. After paying off the existing loan and applicable transaction costs, the remaining eligible proceeds are provided to the homeowner.
The amount available depends on property value, existing liens, loan program, occupancy, credit and income qualification, state law, and lender guidelines. Because the new loan balance is larger, the resulting payment, rate, term, closing costs, and long-term interest expense should all be reviewed.
Why Homeowners Consider Cash-Out Refinancing
Common goals include home improvements, consolidating higher-cost debts, major planned expenses, education costs, business or investment needs, and restructuring household finances.
Using home equity converts part of the property’s accumulated value into mortgage debt. The intended use of the funds should be weighed against the new payment, total borrowing cost, loan term, closing costs, and the risk of securing additional debt with the home.
Cash-Out Refinance Programs & Loan Types
Conventional
FHA
VA
Texas Cash-Out Refinance Rules Require Special Review
Cash-Out Refinance vs HELOC vs Home Equity Loan
Cash-out refinance: replaces the existing first mortgage with a larger eligible loan and provides equity proceeds at closing.
HELOC: generally provides revolving access to approved home equity and may allow the existing first mortgage to remain in place.
Home equity loan: generally provides a lump-sum second mortgage with a defined repayment structure.
The right comparison depends on the current first-mortgage terms, how much equity is needed, whether funds are needed once or over time, and the total borrowing cost of each structure.
Explore HELOC options, review home equity loans, or use our home-equity comparison guide.
Cash-Out Refinance Rates, Requirements & Common Questions
What affects cash-out refinance rates?
Rates can vary with market conditions, loan program, credit profile, loan-to-value, occupancy, property type, loan amount, and other lender-specific factors. Current transaction pricing is more useful than a static advertised rate.
How much cash can I receive?
The amount depends on property value, the current mortgage balance and other liens, the selected loan program, occupancy, credit and income qualification, state requirements, and lender guidelines.
What are common cash-out refinance requirements?
Lenders may review credit, qualifying income, debts, property value, occupancy, loan history, seasoning, reserves, and loan-to-value. Requirements vary by program and lender.
Can cash-out funds be used for different purposes?
Generally, proceeds can support a variety of lawful financial goals, but homeowners should consider the cost and risk of converting equity into debt secured by the home.
Is cash-out refinancing available with FHA or VA financing?
FHA and VA both offer cash-out refinance pathways for eligible borrowers and properties, subject to their respective program and lender requirements.
Is cash-out the same as FHA Streamline or VA IRRRL?
No. FHA Streamline and VA IRRRL are primarily rate-and-term refinance pathways for eligible existing FHA or VA loans. They are addressed within our main refinance guide.
Can I cash out an investment property?
Potentially. Certain conventional and alternative programs may allow cash-out refinancing on eligible investment properties, subject to property, occupancy, loan-to-value, reserve, and lender requirements.