What are the current cash-out refinance rates?
NerdWallet’s mortgage rate tool helps you find competitive, customized cash-out refinance rates. In the filters above, click or tap the “Refinance” button under “Loan purpose.” Fill in the rest of the details, making sure to select “Yes” on the “Cash-out” button. In moments, you’ll get a rate quote tailored to meet your needs. From there, you can start the process of getting approved for your cash-out refinance.
What is a cash-out refinance?
A cash-out refinance is a new larger loan replacing your current mortgage. You’ll be borrowing what you owe on your existing loan, plus the cash you take out from your home’s equity.
Your home equity is the difference between the current market value of your house and your mortgage balance. For example, if your home is now worth $300,000 and you owe $200,000, you have $100,000 in equity. Put $40,000 of that in your pocket, and your new loan will be $240,000. Closing costs often may be subtracted from the equity draw, unless you’re bringing cash to closing.
How much cash can I get with a cash-out refinance?
Lenders will typically limit the cash you take out to 80% to 90% of your home equity. An appraisal will be required to nail down your home’s current market value.
What are the requirements for a cash-out refinance?
In order to qualify for a cash-out refinance, you’ll have to meet lender requirements. Each lender will have its own set of criteria, but here are some general expectations:
Credit score of at least 620. The best rates are reserved for those with the highest credit scores.
Equity of at least 20%. You need to have built up equity in order to pull it out.
Debt-to-income ratio at or below 50%. For most cash-out refinances, your total amount of existing debt (including your mortgage) can’t exceed 50% of your gross monthly income.
How much does it cost to get a cash-out refinance?
As with any mortgage refinance, you’ll pay closing costs for a cash-out refinance. Closing costs typically range from 2% to 5% of the total mortgage amount — that’s $7,000 to $17,500 on a $350,000 mortgage.
Pros and cons of a cash-out refinance
Pros
Potentially lower rate. If you’re refinancing in order to lower your interest rate, you could save on your mortgage payments long-term.
Access to cash. If refinancing makes sense for you, a cash-out refinance allows you to access equity and convert it into cash.
It’s all one loan. Some borrowers may prefer to only worry about one mortgage payment, rather than managing both a primary mortgage and a home equity loan or home equity line of credit.
Cons
Closing costs. Just like with your first mortgage, you’ll be required to pay closing costs of 2% to 5% when you refinance.
New terms. When you refinance, you get a new set of terms in addition to a new rate; essentially, you’re restarting the clock. This could add years to your loan (resulting in extra interest payments) or mean higher monthly payments.
Foreclosure risk. Now that you’re taking on a larger mortgage, you risk losing your home if you can’t keep up with the new payments.
When to consider a cash-out refinance
A cash-out refinance might make sense if you can get a good rate and have a financially sound strategy for using the cash. Since you’re mortgaging your home in order to access the cash, the best uses for cash-out proceeds are home repairs and improvements, which can increase the value of your home and provide a return on your investment. A cash-out refinance is not recommended for financing a vacation or other expenditure that won’t grow your wealth.
Alternatives to a cash-out refinance
A home equity loan or home equity line of credit (HELOC) is a second mortgage that lets you borrow against your home equity. A cash-out refinance typically has a lower interest rate than a home equity loan or HELOC, and refinancing may provide a lower rate than your current mortgage. However, you may end up paying more in fees for a cash-out refinance than you would a home equity loan or HELOC.
» MORE: Home equity loan or HELOC vs cash-out refinance
More about cash-out refinance:
Cash-out refinance: How it works and what to know
Cash-out refinance calculator
Best cash-out refinance lenders
Alternatives to cash-out refinance:
Getting a home equity loan: What it is and how it works
Home equity loan or HELOC vs. cash-out refi
What is a home equity line of credit, or HELOC?
