1. What is 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 is a common way to access home equity for major expenses.

2. How Does the Calculator Work?

The calculator uses two main formulas:

Where:

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

Explanation: The calculator first determines your new loan amount, then calculates the monthly payment based on current interest rates and your chosen term.

3. Importance of Cash Out Refinance

Details: Cash-out refinancing can help homeowners access equity for home improvements, debt consolidation, or other financial needs, often at lower interest rates than other loan types.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between cash-out and rate-and-term refinance?
A: Cash-out refinance gives you additional funds, while rate-and-term only changes your interest rate and/or loan term.

Q2: How much cash can I get from refinancing?
A: Typically up to 80% of your home's value minus your current mortgage balance, but this varies by lender.

Q3: When is cash-out refinancing a good idea?
A: When interest rates are low, you need funds for value-adding improvements, or to consolidate high-interest debt.

Q4: What are the costs of cash-out refinancing?
A: Expect 2-5% of loan amount in closing costs, similar to your original mortgage.

Q5: Does this affect my home equity?
A: Yes, it reduces your equity since you're increasing your loan amount.