Your estimated monthly payment and total cash available will appear here.
Understanding Cash-Out Refinancing
Cash-out refinancing is a financial strategy where you refinance your existing mortgage for a larger amount than you currently owe, allowing you to receive the difference in cash. This cash can be used for various purposes, such as home renovations, debt consolidation, education expenses, or investments. The key is that you are essentially taking out a new loan that replaces your old one, and the equity you've built up in your home acts as collateral.
How the Cash-Out Refinance Calculator Works
This calculator helps you estimate the potential financial implications of a cash-out refinance. It takes into account several key factors:
Current Home Value: The estimated market value of your property. Lenders typically allow you to borrow up to a certain percentage of this value (Loan-to-Value ratio).
Remaining Mortgage Balance: The outstanding principal amount on your current mortgage.
Desired Cash-Out Amount: The lump sum of cash you wish to receive from the refinance.
New Loan Interest Rate: The interest rate on the new, larger mortgage. This is a crucial factor in determining your monthly payment and the total cost of the loan over time.
New Loan Term (Years): The duration over which you will repay the new mortgage. Longer terms generally mean lower monthly payments but more interest paid overall.
Refinance Costs: These are the closing costs associated with obtaining the new loan, often expressed as a percentage of the new loan amount (e.g., origination fees, appraisal fees, title insurance).
The Calculations
The calculator performs the following estimations:
Total New Loan Amount: This is calculated by adding your remaining mortgage balance, the desired cash-out amount, and the estimated refinance costs.
Total New Loan Amount = Remaining Mortgage Balance + Desired Cash-Out Amount + (Desired Cash-Out Amount + Remaining Mortgage Balance) * (Refinance Costs / 100)
*(Note: Refinance costs are often applied to the entire new loan amount, not just the cash-out portion. This formula assumes they are calculated on the total amount needed to cover the old balance and the cash out.)*
Monthly Principal & Interest (P&I) Payment: This is calculated using the standard mortgage payment formula (Amortization Formula):
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount (Total New Loan Amount)
i = Monthly Interest Rate (New Loan Interest Rate / 12 / 100)
n = Total Number of Payments (Loan Term in Years * 12)
Net Cash Received: This is the actual amount of cash you will walk away with after accounting for the refinance costs.
Net Cash Received = Desired Cash-Out Amount - (Desired Cash-Out Amount + Remaining Mortgage Balance) * (Refinance Costs / 100)
*(This formula refines the net cash to reflect costs associated with the entire new loan balance, ensuring the cash-out portion is accurately represented after costs.)*
When to Consider Cash-Out Refinancing
Cash-out refinancing can be a valuable tool, but it's important to weigh the benefits against the costs. Consider it if:
You have significant equity in your home.
You need a substantial amount of cash for a specific purpose.
Current interest rates are favorable compared to your existing mortgage or other borrowing options.
You have a solid plan for how you will use the funds.
Remember that refinancing extends your mortgage term and increases the total interest paid over the life of the loan. Always consult with a financial advisor to determine if cash-out refinancing is the right decision for your individual circumstances.
function calculateCashOutRefinance() {
var currentHomeValue = parseFloat(document.getElementById("currentHomeValue").value);
var remainingMortgageBalance = parseFloat(document.getElementById("remainingMortgageBalance").value);
var desiredCashOutAmount = parseFloat(document.getElementById("desiredCashOutAmount").value);
var newLoanInterestRate = parseFloat(document.getElementById("newLoanInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var refinanceCostsPercentage = parseFloat(document.getElementById("refinanceCosts").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// — Input Validation —
if (isNaN(currentHomeValue) || currentHomeValue <= 0 ||
isNaN(remainingMortgageBalance) || remainingMortgageBalance < 0 ||
isNaN(desiredCashOutAmount) || desiredCashOutAmount <= 0 ||
isNaN(newLoanInterestRate) || newLoanInterestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0 ||
isNaN(refinanceCostsPercentage) || refinanceCostsPercentage = currentHomeValue) {
resultDiv.innerHTML = "Remaining mortgage balance cannot exceed current home value.";
return;
}
// — Calculations —
var refinanceCostsAmount = (remainingMortgageBalance + desiredCashOutAmount) * (refinanceCostsPercentage / 100);
var totalNewLoanAmount = remainingMortgageBalance + desiredCashOutAmount + refinanceCostsAmount;
var netCashReceived = desiredCashOutAmount – refinanceCostsAmount; // This represents the cash out portion after its share of costs.
// Ensure net cash isn't negative after costs
if (netCashReceived 0) {
monthlyPayment = totalNewLoanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else { // Handle 0% interest rate case
monthlyPayment = totalNewLoanAmount / numberOfPayments;
}
// — Display Results —
resultDiv.innerHTML =
"