A cash-out refinance is a type of mortgage refinance where you replace your existing mortgage with a new one for a larger amount. The difference between the new loan amount and your outstanding balance on the old loan is paid out to you in cash. This allows homeowners to tap into their home's equity for various purposes, such as home improvements, debt consolidation, education expenses, or investments.
While it can be a powerful financial tool, it's crucial to understand the implications. You'll be increasing your mortgage debt, and the new loan will likely have a different interest rate and term than your original mortgage. It's essential to weigh the benefits of accessing cash against the increased cost of borrowing and the longer repayment period.
How the Calculator Works
This calculator helps you estimate the total amount of your new mortgage after a cash-out refinance. It takes into account your current home's value, your existing mortgage balance, the amount of cash you wish to receive, and the estimated closing costs associated with the refinance.
Current Home Value: The estimated market value of your property.
Current Mortgage Balance: The outstanding principal amount on your existing mortgage.
Desired Cash Out Amount: The lump sum of cash you aim to receive from the refinance.
Estimated Refinance Closing Costs: These are fees associated with obtaining a new mortgage, typically ranging from 2% to 5% of the loan amount. This calculator asks for this as a percentage to simplify input.
The calculator first determines the total amount needed to cover your existing balance, the cash you want, and the closing costs. It then presents this as your estimated new mortgage amount.
Key Considerations:
Loan-to-Value (LTV) Ratio: Lenders typically have limits on the maximum LTV they will allow for a cash-out refinance (often around 80%). This calculator does not enforce LTV limits but assumes the refinance is possible.
Interest Rates: Cash-out refinance rates are often slightly higher than "rate-and-term" refinances. Ensure you compare offers from multiple lenders.
Closing Costs: Factor these into your decision. They can add a significant amount to your total loan.
Purpose of Funds: Ensure the reason for taking cash out justifies the increased debt and interest paid over time.
Example Calculation:
Let's say you have:
Current Home Value: $500,000
Current Mortgage Balance: $300,000
Desired Cash Out Amount: $50,000
Estimated Refinance Closing Costs: 3% (or 0.03)
Calculation Steps:
Total Loan Principal Needed: Current Mortgage Balance + Desired Cash Out Amount = $300,000 + $50,000 = $350,000
Calculate Closing Costs Amount: Total Loan Principal Needed * Closing Costs Percentage = $350,000 * 0.03 = $10,500
Estimated New Mortgage Amount: Total Loan Principal Needed + Closing Costs Amount = $350,000 + $10,500 = $360,500
In this example, your new mortgage would be approximately $360,500.
function calculateCashOutRefi() {
var currentHomeValue = parseFloat(document.getElementById("currentHomeValue").value);
var currentMortgageBalance = parseFloat(document.getElementById("currentMortgageBalance").value);
var desiredCashOut = parseFloat(document.getElementById("desiredCashOut").value);
var refinanceClosingCostsPercent = parseFloat(document.getElementById("refinanceClosingCosts").value);
var resultValueElement = document.getElementById("result-value");
if (isNaN(currentHomeValue) || isNaN(currentMortgageBalance) || isNaN(desiredCashOut) || isNaN(refinanceClosingCostsPercent)) {
resultValueElement.innerHTML = "Please enter valid numbers.";
resultValueElement.style.color = "#dc3545";
return;
}
if (currentHomeValue <= 0 || currentMortgageBalance < 0 || desiredCashOut <= 0 || refinanceClosingCostsPercent < 0) {
resultValueElement.innerHTML = "Inputs must be positive (except current balance which can be 0).";
resultValueElement.style.color = "#dc3545";
return;
}
// Calculate the principal amount needed for the new loan before closing costs
var loanPrincipalBeforeCosts = currentMortgageBalance + desiredCashOut;
// Calculate the actual dollar amount of closing costs
var closingCostsAmount = loanPrincipalBeforeCosts * (refinanceClosingCostsPercent / 100);
// Calculate the total new mortgage amount
var newMortgageAmount = loanPrincipalBeforeCosts + closingCostsAmount;
// Format the result as currency
var formattedResult = "$" + newMortgageAmount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
resultValueElement.innerHTML = formattedResult;
resultValueElement.style.color = "#28a745"; // Success Green
}