Cash Refinance Calculator

Estimate your potential cash-out refinance savings and understand the impact on your monthly payments.

Cash-Out Refinance Calculator

Loan Amortization Comparison

Comparison of remaining loan balance over time for the original loan vs. the new cash-out refinance loan.

Amortization Schedule Snippet

Year	Original Loan Balance	New Loan Balance

What is a Cash Refinance?

A cash refinance, more commonly known as a cash-out refinance, is a type of mortgage refinancing where you replace your existing home loan with a new one for a larger amount. The difference between the new loan amount and what you owed on your old loan, minus any fees, is paid out to you in cash. This allows homeowners to tap into their home equity—the difference between your home's value and your outstanding mortgage balance—to access funds for various purposes.

Who should use a cash refinance? Homeowners who have built significant equity in their homes and need funds for major expenses like home renovations, debt consolidation, education costs, medical bills, or investments. It can be a strategic financial move if you can secure a lower interest rate than other forms of borrowing or if you need a substantial amount of capital.

Common misconceptions about cash refinance:

• It's always the cheapest way to borrow: While it can be, it depends heavily on current interest rates and your creditworthiness. Other loan types might be more suitable in certain situations.
• You'll always pay more interest: If you secure a lower interest rate on the new loan, you might pay less interest overall, even with a larger loan amount, especially if you shorten the loan term.
• It's just like taking out a second mortgage: While similar in accessing equity, a cash-out refinance replaces your primary mortgage entirely, whereas a home equity loan or HELOC is a separate loan.

Cash Refinance Formula and Mathematical Explanation

The core of a cash refinance calculation involves determining the new loan amount, the resulting monthly payment, the total interest paid over the life of the loan, and the remaining home equity. Here's a breakdown:

1. Calculating the New Loan Amount

The new loan amount is the sum of your existing mortgage balance, the cash you wish to take out, and any associated closing costs. This is a straightforward addition:

New Loan Amount = Current Mortgage Balance + Desired Cash Out + Closing Costs

2. Calculating the New Monthly Payment

This uses the standard mortgage payment formula, often referred to as the annuity formula. It calculates the fixed periodic payment required to fully amortize a loan over a set period.

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:

• M = Monthly Payment
• P = Principal Loan Amount (the New Loan Amount calculated above)
• i = Monthly Interest Rate (Annual Interest Rate / 12 / 100)
• n = Total Number of Payments (Loan Term in Years * 12)

3. Calculating Total Interest Paid

This is the total amount of interest you will pay over the entire life of the new loan.

Total Interest Paid = (Monthly Payment * Total Number of Payments) - Principal Loan Amount

4. Calculating Home Equity After Refinance

This represents the portion of your home's value that you truly own after the refinance is complete.

Home Equity After Refinance = Current Home Value - New Loan Amount

Variables Table

Variables Used in Cash Refinance Calculations

Variable	Meaning	Unit	Typical Range
Current Home Value	Market value of the property.	USD ($)	$100,000 – $1,000,000+
Current Mortgage Balance	Remaining debt on the existing mortgage.	USD ($)	$50,000 – $800,000+
Desired Cash Out	Amount of cash requested by the borrower.	USD ($)	$10,000 – $200,000+
New Interest Rate	Annual interest rate on the new loan.	Percent (%)	2.5% – 8.0%+
Loan Term	Duration of the new mortgage.	Years	15, 20, 25, 30
Closing Costs	Fees associated with originating the new loan.	USD ($)	$2,000 – $10,000+
New Loan Amount (P)	Total principal for the new mortgage.	USD ($)	Calculated
Monthly Interest Rate (i)	Interest rate per month.	Decimal	Calculated (e.g., 0.0375 for 4.5% APR)
Number of Payments (n)	Total number of monthly payments.	Count	Calculated (e.g., 360 for 30 years)
Monthly Payment (M)	Fixed payment each month.	USD ($)	Calculated
Total Interest Paid	Sum of all interest over the loan term.	USD ($)	Calculated
Home Equity After Refi	Owner's stake in the home post-refinance.	USD ($)	Calculated

Practical Examples (Real-World Use Cases)

Example 1: Home Renovation Funding

Sarah owns a home valued at $400,000 with an outstanding mortgage balance of $250,000. She wants to do a major kitchen remodel costing $60,000 and needs an additional $10,000 for unexpected expenses. Her current mortgage has a 5% interest rate over 25 years remaining. She qualifies for a new cash-out refinance at 4.5% interest for 30 years, with estimated closing costs of $7,000.

• Current Home Value: $400,000
• Current Mortgage Balance: $250,000
• Desired Cash Out: $70,000 ($60,000 + $10,000)
• New Interest Rate: 4.5%
• New Loan Term: 30 Years
• Closing Costs: $7,000

Calculator Results:

• New Loan Amount: $250,000 + $70,000 + $7,000 = $327,000
• New Monthly Payment: Approximately $1,659
• Total Interest Paid (over 30 years): Approximately $269,240
• Home Equity After Refi: $400,000 – $327,000 = $73,000

Financial Interpretation: Sarah successfully accesses $70,000 in cash for her renovations. Although her loan term extends to 30 years and her monthly payment increases slightly from her previous payment (approx. $1,475 for the original loan), she secures a lower interest rate (4.5% vs 5%). This strategy allows her to fund her project while potentially paying less interest over the long run compared to keeping her old loan and taking out a separate, likely higher-interest, personal loan or home equity line of credit for the $70,000.

Example 2: Debt Consolidation and Lower Payments

John has a home worth $500,000 with a remaining mortgage balance of $300,000 at 6% interest over 20 years remaining. He also has $40,000 in high-interest credit card debt (average 18% APR). He wants to consolidate his debt and potentially lower his overall monthly payments. He finds a cash-out refinance option at 4.0% interest for 30 years, with closing costs of $8,000. He needs $40,000 for debt consolidation.

• Current Home Value: $500,000
• Current Mortgage Balance: $300,000
• Desired Cash Out: $40,000
• New Interest Rate: 4.0%
• New Loan Term: 30 Years
• Closing Costs: $8,000

Calculator Results:

• New Loan Amount: $300,000 + $40,000 + $8,000 = $348,000
• New Monthly Payment: Approximately $1,661
• Total Interest Paid (over 30 years): Approximately $250,000
• Home Equity After Refi: $500,000 – $348,000 = $152,000

Financial Interpretation: John consolidates his $40,000 debt into his mortgage. His new mortgage payment is $1,661, compared to his previous mortgage payment of approximately $2,100 (for the original $300k loan at 6% over 20 years). He significantly lowers his monthly housing expense and eliminates high-interest credit card debt. While the loan term is longer (30 years vs. remaining 20), the lower interest rate (4.0% vs. 6% on mortgage + 18% on credit cards) makes this a financially sound decision, saving him substantial interest overall and improving his monthly cash flow.

How to Use This Cash Refinance Calculator

Our Cash Refinance Calculator is designed for simplicity and accuracy. Follow these steps to get your personalized results:

1. Enter Current Home Value: Input the most recent appraised value or estimated market value of your home.
2. Input Current Mortgage Balance: Enter the exact amount you currently owe on your mortgage.
3. Specify Desired Cash Out: Enter the total amount of cash you need or want to receive.
4. Provide New Interest Rate: Enter the Annual Percentage Rate (APR) you expect to receive on the new cash-out refinance loan.
5. Select New Loan Term: Choose the desired duration (in years) for your new mortgage from the dropdown menu.
6. Estimate Closing Costs: Input the total fees and expenses you anticipate paying to secure the new loan.
7. Click 'Calculate': Once all fields are populated, click the 'Calculate' button.

How to Read Results:

• New Loan Amount: This is the total principal you will borrow, including your old balance, cash out, and fees.
• New Monthly Payment: This is your estimated principal and interest payment for the new loan. It does not include property taxes, homeowner's insurance, or potential Private Mortgage Insurance (PMI).
• Total Interest Paid: This shows the cumulative interest you'll pay over the entire loan term. Compare this to the interest you would pay on your current loan to understand the long-term cost.
• Home Equity After Refi: This indicates your remaining equity in the home after the new loan is taken out.

Decision-Making Guidance: Use these results to compare the costs and benefits. If the new monthly payment fits your budget and the cash-out amount meets your needs, and if the total interest paid is acceptable or even lower than alternative borrowing methods, a cash refinance might be a good option. Always consult with a mortgage professional for personalized advice.

Key Factors That Affect Cash Refinance Results

Several elements significantly influence the outcome of a cash refinance. Understanding these can help you prepare and make informed decisions:

1. Current Interest Rates: This is paramount. If market rates are significantly lower than your current mortgage rate, refinancing can lead to substantial savings on interest and potentially a lower monthly payment, even after adding cash out. Conversely, if rates have risen, a cash-out refinance might increase your costs.
2. Loan-to-Value (LTV) Ratio: Lenders have limits on how much they'll lend relative to your home's value. Typically, for a cash-out refinance, the maximum LTV is around 80%. A higher LTV means less equity to tap into and potentially higher interest rates or denial.
3. Credit Score: A higher credit score generally qualifies you for lower interest rates and better loan terms. A lower score might result in higher rates, fewer options, or ineligibility for a cash-out refinance.
4. Closing Costs: These fees (appraisal, title insurance, origination fees, etc.) add to your total borrowing cost. They can range from 2% to 6% of the loan amount. High closing costs can negate savings, especially if you plan to move or refinance again soon.
5. Loan Term: Extending your loan term (e.g., from a remaining 15 years to a new 30 years) will lower your monthly payments but significantly increase the total interest paid over time. Shortening the term lowers total interest but raises monthly payments.
6. Home Equity: The amount of equity you have determines how much cash you can potentially access. Equity is built through mortgage payments and home appreciation. Without sufficient equity, a cash-out refinance isn't feasible.
7. Market Conditions & Inflation: Broader economic factors like inflation can influence interest rate trends set by central banks. High inflation often leads to higher interest rates, making refinancing less attractive.
8. Tax Implications: While interest paid on a mortgage used to buy, build, or substantially improve the home is generally tax-deductible, interest on cash taken out for other purposes (like debt consolidation or investments) may not be. Consult a tax advisor.

Frequently Asked Questions (FAQ)

Q1: How much cash can I get from a cash-out refinance?

A1: Typically, lenders allow you to borrow up to 80% of your home's value, minus your current mortgage balance. For example, on a $400,000 home with $200,000 owed, you might be able to borrow up to $320,000 (80% LTV), allowing for $120,000 in cash out, minus closing costs.

Q2: Is a cash-out refinance a good idea for debt consolidation?

A2: It can be, especially if you have high-interest debt (like credit cards) and can secure a lower interest rate through refinancing. However, be mindful that you're converting unsecured debt into secured debt (your home), and extending the loan term increases total interest paid.

Q3: Will my monthly payment go up with a cash-out refinance?

A3: It depends. If you take out a significantly larger loan amount or extend the loan term, your payment will likely increase. However, if you secure a much lower interest rate, it's possible for your payment to stay the same or even decrease, despite taking out cash.

Q4: What are the risks of a cash-out refinance?

A4: The primary risk is increasing your total debt and potentially over-leveraging your home. If property values decline, you could owe more than your home is worth. Missing payments could lead to foreclosure.

Q5: How long does the cash-out refinance process take?

A5: Similar to a standard refinance, it typically takes 30-60 days from application to closing, depending on the lender, appraisal process, and title work.

Q6: Can I refinance if my home value has decreased?

A6: It's more challenging. Lenders rely on LTV ratios. If your home value has dropped significantly, you may not have enough equity to qualify for a cash-out refinance, or the amount you can borrow might be limited.

Q7: Are closing costs negotiable on a cash-out refinance?

A7: Some closing costs, like origination fees, might be negotiable. You may also have the option to roll closing costs into the loan amount, which increases your total loan principal and interest paid.

Q8: What's the difference between a cash-out refinance and a home equity loan?

A8: A cash-out refinance replaces your existing mortgage with a new, larger one, and you receive the difference in cash. A home equity loan (or HELOC) is a separate loan taken out *in addition* to your existing mortgage, secured by your home equity.