1. What is Cash Out Refinance?

Cash out refinance is when you replace your current mortgage with a new, larger loan and receive the difference in cash. This allows homeowners to tap into their home equity while refinancing their mortgage.

2. How Does the Calculator Work?

The calculator uses the NerdWallet formula:

Where:

• \( \text{Old Balance} \) — Current mortgage balance (USD)
• \( \text{Cash Out} \) — Amount of cash you want to take out (USD)
• \( \text{Fees} \) — Closing costs and fees (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Loan term in months

Explanation: The formula calculates the new monthly payment based on the increased loan amount after cash out, accounting for fees and the new interest rate.

3. Importance of Cash Out Refinance Calculation

Details: Understanding your new payment helps determine if cash out refinancing makes financial sense for your situation. It's crucial for budgeting and comparing different loan options.

4. Using the Calculator

Tips: Enter all values in USD. For the interest rate, use the decimal form (e.g., 0.04 for 4%). The loan term should be in months (e.g., 360 for 30 years).

5. Frequently Asked Questions (FAQ)

Q1: What are typical cash out refinance fees?
A: Fees typically range from 2% to 5% of the loan amount and may include appraisal, origination, and closing costs.

Q2: How much cash can I take out?
A: Most lenders allow up to 80% of your home's value minus your current mortgage balance.

Q3: When does cash out refinance make sense?
A: When you need funds for home improvements, debt consolidation, or investments, and current rates are favorable.

Q4: What's the difference between rate-and-term and cash out refinance?
A: Rate-and-term only changes loan terms, while cash out also provides you with additional funds.

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