Cash-Out Refinance

Convert Accumulated Property Equity Into Available Capital

A cash-out refinance replaces an existing mortgage with a larger new mortgage and provides eligible equity proceeds to the borrower. It can be useful when substantial funds are needed, but replacing the existing first mortgage should be compared with HELOC and second-mortgage alternatives.

One New First Mortgage

Cash-out refinancing consolidates the existing first mortgage and additional borrowing into a new first-lien loan.

Compare Before Replacing a Low-Rate Mortgage

If the existing first mortgage has favorable terms, accessing equity through a second lien may sometimes produce better economics.

How a Cash-Out Refinance Works

The new mortgage pays off the existing eligible liens and provides the remaining permitted proceeds to the borrower after applicable costs.

The maximum transaction is generally limited by the property's value and program loan-to-value requirements.

Available equity and borrowable equity are therefore not necessarily the same amount.

Reasons to Consider Cash-Out Financing

Borrowers may seek cash for property improvements, investment, major expenses, debt restructuring or other permitted purposes.

The appropriate use is a financial decision that should be considered together with the cost of increasing mortgage debt.

Existing Mortgage Rate Is Critical

Suppose a homeowner has a large first mortgage at a substantially lower rate than currently available financing.

Refinancing the entire balance to obtain a relatively small amount of additional cash may increase interest expense on money that was already financed inexpensively.

This is why we compare cash-out refinancing with second-lien alternatives.

Loan-to-Value and Property Value

The maximum cash available depends partly on the appraised property value and applicable loan-to-value limit.

Occupancy, credit, program and other factors can affect the maximum leverage permitted.

Evaluate the New Payment and Long-Term Cost

Cash-out refinancing changes both the loan balance and potentially the interest rate and repayment term.

We therefore evaluate the resulting payment, transaction costs and longer-term financing consequences—not simply the amount of cash available at closing.