1. What is Cash Out Refinance?

A cash-out refinance is a mortgage refinancing option where the new mortgage is for a larger amount than the existing loan, allowing the borrower to convert home equity into cash.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( \text{New PV} \) — New principal value after cash out
• \( \text{Old Balance} \) — Remaining balance on current loan
• \( \text{Cash Out} \) — Additional cash being taken out
• \( r \) — Periodic interest rate (decimal)
• \( n \) — Number of remaining payment periods
• \( \text{New PMT} \) — New monthly payment amount

Explanation: The calculator determines your new mortgage payment after refinancing with additional cash out.

3. Importance of Refinance Calculation

Details: Understanding your new payment helps evaluate whether cash-out refinancing makes financial sense for your situation.

4. Using the Calculator

Tips: Enter your current loan balance, desired cash out amount, new interest rate (as decimal), and the number of payment periods (e.g., 360 for 30-year mortgage).

5. Frequently Asked Questions (FAQ)

Q1: When does cash-out refinancing make sense?
A: When you need funds for home improvements, debt consolidation, or investments, and can secure a better interest rate.

Q2: What are the costs of cash-out refinancing?
A: Closing costs typically range from 2-5% of the loan amount, plus potentially higher interest payments over time.

Q3: How does this differ from home equity loans?
A: Cash-out refinance replaces your existing mortgage, while home equity loans are second mortgages.

Q4: What's the maximum cash out amount?
A: Typically up to 80% of your home's value minus current mortgage balance, but varies by lender.

Q5: How does this affect my loan term?
A: Your loan term resets to the new mortgage term (e.g., 30 years), which may extend your repayment period.