Estimate the potential cash you can receive from a cash-out refinance.
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Potential Cash-Out Amount:
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Understanding Cash-Out Refinance
A cash-out refinance allows you to replace your existing mortgage with a new, larger loan, and receive the difference in cash. This can be a useful financial tool for various purposes, such as home improvements, debt consolidation, or investments. However, it's crucial to understand how the amount is calculated and the implications of taking on a larger mortgage.
How the Calculator Works
This calculator estimates the maximum cash you could potentially receive from a cash-out refinance based on your home's current value, your outstanding mortgage balance, your desired Loan-to-Value (LTV) ratio, and estimated refinancing costs.
The calculation follows these steps:
Determine Maximum Loan Amount: The maximum loan amount you can qualify for is determined by your lender's maximum LTV ratio. This ratio represents the maximum percentage of your home's value that a lender is willing to lend against.
Maximum Loan Amount = Current Home Value × (Desired LTV Ratio / 100)
Calculate Available Equity: This is the portion of your home's value that you "own."
Available Equity = Current Home Value - Current Mortgage Balance
Determine Maximum Cash-Out: The actual cash you can take out is the difference between the maximum loan amount you can secure and your current mortgage balance, minus any associated closing costs.
Potential Cash-Out = Maximum Loan Amount - Current Mortgage Balance - Estimated Refinance Costs
Key Terms Explained:
Current Home Value: The estimated market value of your property. This is often determined by a professional appraisal.
Current Mortgage Balance: The total amount you currently owe on your existing mortgage.
Desired LTV Ratio: This is a critical input. Lenders set a maximum LTV they allow for cash-out refinances. Common limits are between 70% and 85%, but can vary. A higher LTV allows you to borrow more against your home's value, but may come with higher interest rates or Private Mortgage Insurance (PMI) if your equity is less than 20% in the new loan.
Estimated Refinance Costs: These are the fees associated with obtaining a new mortgage. They can include appraisal fees, title insurance, loan origination fees, recording fees, etc. These typically range from 2% to 5% of the new loan amount, but can be a fixed amount.
Potential Cash-Out Amount: This is the net amount of cash you could receive after all loan disbursements and costs are settled.
Important Considerations:
Closing Costs: These can significantly reduce the actual cash you receive. Always get a detailed Loan Estimate from your lender.
Interest Rate: A cash-out refinance will have a new interest rate, which could be higher than your current rate, especially in a rising interest rate environment. This will increase your monthly payments.
Loan Term: You'll be starting a new loan term (e.g., 15 or 30 years), which could reset your payment schedule.
Home Equity: You are reducing your home equity by taking cash out. Ensure you have sufficient equity remaining for your financial security and future needs.
Lender Requirements: Lenders have specific criteria for credit scores, income, and LTV ratios for cash-out refinances.
This calculator provides an estimate. Consult with a mortgage professional for personalized advice and accurate quotes.
function calculateCashOut() {
var currentHomeValue = parseFloat(document.getElementById("currentHomeValue").value);
var currentMortgageBalance = parseFloat(document.getElementById("currentMortgageBalance").value);
var loanToValueRatio = parseFloat(document.getElementById("loanToValueRatio").value);
var refiCosts = parseFloat(document.getElementById("refiCosts").value);
var resultDiv = document.getElementById("result-amount");
// Clear previous results and error messages
resultDiv.innerHTML = "–";
resultDiv.style.color = "#28a745"; // Reset to success green
// Input validation
if (isNaN(currentHomeValue) || currentHomeValue <= 0) {
resultDiv.innerHTML = "Invalid Home Value";
resultDiv.style.color = "red";
return;
}
if (isNaN(currentMortgageBalance) || currentMortgageBalance < 0) {
resultDiv.innerHTML = "Invalid Mortgage Balance";
resultDiv.style.color = "red";
return;
}
if (isNaN(loanToValueRatio) || loanToValueRatio 100) {
resultDiv.innerHTML = "Invalid LTV Ratio (0-100%)";
resultDiv.style.color = "red";
return;
}
if (isNaN(refiCosts) || refiCosts < 0) {
resultDiv.innerHTML = "Invalid Refinance Costs";
resultDiv.style.color = "red";
return;
}
var maxLoanAmount = currentHomeValue * (loanToValueRatio / 100);
var potentialCashOut = maxLoanAmount – currentMortgageBalance – refiCosts;
// Ensure cash out is not negative
if (potentialCashOut < 0) {
potentialCashOut = 0;
}
// Format as currency
var formattedCashOut = '$' + potentialCashOut.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
resultDiv.innerHTML = formattedCashOut;
}