1. What is a Cash-Out Refinance?

A cash-out refinance replaces your existing mortgage with a new, larger loan, allowing you to receive the difference between the two loans in cash. This lets you tap into your home equity while refinancing your mortgage.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)
• Current Balance — Remaining principal on existing loan
• Cash Out Amount — Additional funds you want to borrow

Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term.

3. When to Consider Cash-Out Refinancing

Details: Common reasons include home improvements, debt consolidation, education expenses, or investment opportunities. It's most beneficial when interest rates are lower than your current rate.

4. Using the Calculator

Tips: Enter your current mortgage balance, desired cash-out amount, new interest rate, and loan term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are the costs of cash-out refinancing?
A: Expect 2-5% of loan amount in closing costs, similar to regular refinancing. These may include appraisal, origination, and title fees.

Q2: How much equity can I take out?
A: Typically up to 80% of home value (new loan ≤ 80% LTV), though requirements vary by lender and loan type.

Q3: Does cash-out refinancing reset my loan term?
A: Yes, you'll have a new loan with a new term (typically 15-30 years), which may extend your repayment period.

Q4: How does this compare to a HELOC?
A: Cash-out refinance gives lump sum at fixed rate, while HELOC offers revolving credit with variable rate. Refinancing usually has lower rates but higher upfront costs.

Q5: Are there tax implications?
A: Interest may be tax-deductible if funds are used for home improvements (consult a tax professional).