A cash-out refinance allows you to replace your existing mortgage with a new, larger loan. You receive the difference between the new loan amount and your old mortgage balance in cash. This cash can be used for various purposes, such as home improvements, debt consolidation, education expenses, or investments.
How it Works:
The calculator helps you estimate the new loan amount and your potential monthly payment after a cash-out refinance.
Key Calculations:
New Loan Amount: This is calculated by adding your current mortgage balance to the desired cash-out amount. You might also need to consider closing costs, which are not explicitly factored into this simplified calculator but are an important consideration in a real refinance.
New Loan Amount = Current Mortgage Balance + Desired Cash-Out Amount
Estimated Monthly Payment: Using the new loan amount, the new interest rate, and the new loan term, we calculate the estimated principal and interest (P&I) payment for your new mortgage. This uses the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] Where:
M = Monthly Payment
P = Principal Loan Amount (New Loan Amount)
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Loan Term in Years * 12)
Cash Received: This is the amount of cash you will walk away with after the refinance, assuming no closing costs are rolled into the loan.
Cash Received = Desired Cash-Out Amount
Important Considerations:
Closing Costs: Refinances involve closing costs, which can range from 2% to 6% of the loan amount. These costs (appraisal fees, title insurance, origination fees, etc.) are not included in this basic calculation and will increase the total amount financed or reduce the net cash received.
Loan-to-Value (LTV) Ratio: Lenders have LTV limits. Your total mortgage balance after refinancing cannot exceed a certain percentage of your home's value (typically 80% for a cash-out refinance).
Interest Rate Risk: You are trading your current mortgage's interest rate for a new one. Ensure the new rate, especially with the added loan amount, is beneficial.
Impact on Equity: Taking cash out reduces your home equity.
Tax Implications: Consult a tax advisor regarding the deductibility of interest on the portion of your mortgage used for purposes other than home improvement.
This calculator provides an estimate for informational purposes only and does not constitute financial advice. Consult with a mortgage professional for personalized guidance.
function calculateCashOutRefinance() {
var currentHomeValue = parseFloat(document.getElementById("currentHomeValue").value);
var currentMortgageBalance = parseFloat(document.getElementById("currentMortgageBalance").value);
var desiredCashOut = parseFloat(document.getElementById("desiredCashOut").value);
var refinanceInterestRate = parseFloat(document.getElementById("refinanceInterestRate").value);
var refinanceLoanTerm = parseFloat(document.getElementById("refinanceLoanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
if (isNaN(currentHomeValue) || isNaN(currentMortgageBalance) || isNaN(desiredCashOut) || isNaN(refinanceInterestRate) || isNaN(refinanceLoanTerm)) {
resultDiv.innerHTML = 'Please enter valid numbers for all fields.';
return;
}
if (currentHomeValue <= 0 || currentMortgageBalance < 0 || desiredCashOut <= 0 || refinanceInterestRate <= 0 || refinanceLoanTerm 0 && numberOfPayments > 0) {
monthlyPayment = newLoanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else if (numberOfPayments > 0) { // Handle 0% interest rate
monthlyPayment = newLoanAmount / numberOfPayments;
}
var resultHtml = '
Refinance Summary
';
resultHtml += 'New Loan Amount: $' + newLoanAmount.toFixed(2) + ";
resultHtml += 'Estimated Monthly Payment (P&I): $' + monthlyPayment.toFixed(2) + ";
resultHtml += 'Cash You Receive: $' + cashReceived.toFixed(2) + ";
resultHtml += 'New Loan-to-Value (LTV): ' + loanToValue.toFixed(1) + '%';
if (loanToValue > 80) {
resultHtml += 'Warning: Your new LTV exceeds 80%. Many lenders have LTV limits for cash-out refinances.';
}
resultDiv.innerHTML = resultHtml;
}