Key Takeaways
- Qualifying for a cash-out refinance is often easier than most homeowners expect if you have steady income and built-up equity.
- The process focuses on a few key numbers like credit score, home equity, and debt-to-income ratio.
- You can choose how to manage closing costs, either by paying upfront or rolling them into your new loan.
It’s normal to feel unsure about what lenders look for when you apply for a cash-out refinance. But if you’ve built solid equity and managed your finances responsibly, you may already be closer than you think to qualifying.
Once you understand the few key numbers lenders focus on, you’ll have a clear sense of how much cash you could tap, and whether now’s the right time to move forward.
In this article (Skip to...)
- What is a cash-out refinance?
- Video: How much can you really get with a cash-out refinance?
- Cash-out refinance requirements
- Calculate your cash-out amount
- Cash-out refinance closing costs
- Cash-out refinance alternatives
- Additional resources
- FAQ
What is a cash-out refinance?
A cash-out refinance replaces your existing home loan with a new, larger mortgage. When you close your loan, you receive cash back equal to the difference between your new loan amount and your old one.
Cash-out refinancing lets you tap the equity in your home and use it for any purpose you like. It’s often a great way to access a large sum of money at relatively low interest rates compared to personal loans or credit cards.
Verify your cash-out refinance eligibility. Start hereHomeowners often choose a cash-out refinance to:
- Pay for home improvements that could increase property value or make the home more comfortable.
- Consolidate high-interest debt (like credit cards or personal loans) into one lower-rate payment.
- Cover major expenses, such as tuition, medical bills, or a wedding.
- Invest in other opportunities, such as a second property or business venture.
- Build an emergency fund or create financial flexibility during uncertain times.
In fact, Federal Reserve research shows that roughly 1 in 10 dollars withdrawn through cash-out refinances is used to pay down other debts, such as credit cards or personal loans, highlighting how many borrowers use this strategy to consolidate and simplify their finances.
Fast Fact
Want to see how a cash-out refinance works in real life? Check out these cash-out refinance examples.
Video: How much can you really get with a cash-out refinance?
Cash-out refinance requirements
To get a cash-out refinance loan, you’ll need to qualify based on your credit score, income, home value, and loan history, just like when applying for a new mortgage.
Find a low cash-out refinance rate. Start hereUse these questions to get a quick sense of whether you meet typical lender guidelines for a cash-out refinance:
- Do I have at least 20% equity left in my home after taking cash out?
- Has my home been recently appraised or do I need a new appraisal to confirm its value?
- Is my credit score 620 or higher (and ideally 700+ for the best rates)?
- Is my debt-to-income (DTI) ratio below 43%?
- Will my loan-to-value (LTV) ratio stay at or below 80% on a conventional loan?
- Can I document stable income and employment?
- Have I held my current mortgage for at least 6–12 months?
If you’re checking most of those boxes, you’re in good shape to explore your cash-out refi options. But keep in mind that the exact requirements depend on the type of loan you choose.
Conventional loans tend to require stronger credit and more equity, while FHA and VA programs offer more flexibility, especially for borrowers with smaller equity positions or lower credit scores.
According to Consumer Financial Protection Bureau (CFPB) data from 2013–2023, the median credit score for cash-out refinance borrowers was about 741, compared with roughly 765 for non–cash-out refinancers, showing that many successful applicants don’t need perfect credit to qualify.
| Requirement | Conventional | FHA | VA |
|---|---|---|---|
| Max LTV | 80% (Keep at least 20% equity) | 80% of appraised value | 90% (cash out up to 90% of value) |
| Min. Credit Score | 640+ (740+ earns best rates) | 580 (620+ often needed) | No official minimum (usually 620–640+) |
| Max DTI | Up to 50% | Flexible (43–50%) | Flexible (VA uses residual income; ~41%) |
| Cash-Out Use | Any purpose | Any purpose | Any purpose |
| Mortgage Insurance / Fee | PMI if LTV > 80% | MIP required (upfront + annual) | VA Funding Fee (can be financed) |
| Loan Age | 12+ months | 6+ months | 6+ months |
| Appraisal | Required | Required | Required |
Fast Fact
Debt-to-Income (DTI) ratio = Monthly debts ÷ Gross monthly income
Example: If your monthly debts total $2,000 and your gross income is $6,000, your DTI = 33%.
Loan-to-Value (LTV) ratio = Loan amount ÷ Appraised home value
Example: If your home is worth $400,000 and your new loan is $320,000, your LTV = 80%.
How to calculate your cash-out amount
A cash-out refinance lets you borrow against your home equity but how much you can actually take out depends on your home value, remaining mortgage balance, and your lender’s loan-to-value (LTV) limit.
Here’s a simple, step-by-step way to estimate how much cash you could take home.
Find a low cash-out refinance rate. Start hereCalculating Your Cash-Out Amount
Step 1: Find your home equity
Subtract your current mortgage balance from your home’s value.
Example: $400,000 – $250,000 = $150,000 in equity
Step 2: Estimate your maximum new loan
Multiply your home value by your allowed LTV ratio.
Example: $400,000 × 80% = $320,000 max loan
Step 3: Calculate your available cash
Subtract what you owe on your current mortgage from your new loan amount.
Example: $320,000 – $250,000 = $70,000 potential cash-out
Step 4: Subtract closing costs
Expect 2%–5% in closing costs.
Example: $70,000 – ($320,000 × 3% = $9,600) = ≈$60,400 in net cash
Cash-out refinance closing costs
Just like your original mortgage, a cash-out refinance comes with closing costs, usually between 2% and 5% of your new loan amount. These cover expenses like the appraisal, title search, lender fees, and other services required to finalize your loan.
You’ll have two options for handling these costs. You can pay them upfront at closing, which keeps your loan balance and long-term interest lower. Or you can roll them into your new mortgage, which adds convenience by reducing out-of-pocket expenses but slightly increases your total loan amount and monthly payment.
For many homeowners, the choice depends on their cash reserves and how long they plan to keep the new loan.
Cash-out refinance alternatives
A cash-out refinance isn’t your only option for turning home equity into cash. Other choices include home equity loans, HELOCs, personal loans, and reverse mortgages. Each has its pros and cons depending on your financial goals and current mortgage status.
Verify your cash-out refinance eligibility. Start hereThe chart below breaks down how each option works and what to expect from the process.
| Feature | Cash-Out Refinance | HELOC | Home Equity Loan | Personal Loan | Reverse Mortgage (HECM) |
|---|---|---|---|---|---|
| Loan Type | New first mortgage (replaces existing one) | Second lien (original mortgage remains) | Second lien (original mortgage remains) | Unsecured debt (no collateral) | Non-recourse loan (no monthly payments) |
| Access to Funds | Lump sum at closing | Revolving line of credit | Lump sum at closing | Lump sum, quickly disbursed | Lump sum, line of credit, or monthly payments |
| Interest Rate | Fixed or adjustable (applies to full new balance) | Variable (fluctuates with market) | Fixed (locked for loan term) | Fixed (often higher) | Variable (fluctuates, may increase debt) |
| Impact on Mortgage | Original loan paid off; new rate and term | Original mortgage remains; two payments | Original mortgage remains; two payments | No impact; original loan stays | Original mortgage paid off; no monthly payments required |
| Typical Costs | Full closing costs (2%–5%) | Low or none (lender may cover fees) | Full closing costs (often lower than refinance) | Origination fee (1%–5%) | High upfront costs (insurance and appraisal) |
Not sure a cash-out refinance is the right fit? Explore how to get equity out of your home with our refinancing.
Additional resources
Looking for more information? We’ve created additional articles that explore a cash-out refinance in more depth. Be sure to check out the resources below.
How Much Cash Can You Take Out With a Cash-Out Refinance
What Is a Cash-Out Refinance and Who Qualifies?
Pros and Cons of a Cash-Out Refinance
How Does a Cash-Out Refinance Work?
Cash-out refinance FAQ
Explore your cash-out refinance options. Start hereReady to turn your home equity into opportunity?
If you’ve built solid equity and kept your finances steady, there’s a good chance you already qualify for a cash-out refinance.
The next step is seeing how much cash you could take out and what your new rate might be. Get personalized quotes from trusted lenders below and find out how quickly your home’s value can help fund your next goal.
Time to make a move? Let us find the right mortgage for you
