1. What is a 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 different from a rate-and-term refinance which only changes the loan terms without taking out additional money.

2. How the Calculation Works

The calculator uses two simple formulas:

Where:

• \( \text{Home Value} \) — Current market value of your property
• \( \text{LTV} \) — Loan-to-value ratio (typically 0.8 or 80%)
• \( \text{Other Liens} \) — Any additional loans against the property
• \( \text{Old Balance} \) — Remaining balance on current mortgage

3. Understanding the Results

New Loan Amount: This is the maximum amount you can borrow based on your home's value and the LTV limit set by your lender.

Cash Out Amount: This is the actual cash you would receive after paying off your existing mortgage. If this value is negative, it means you don't have enough equity for a cash-out refinance.

4. Using the Calculator

Tips: For accurate results, use realistic home values (consider getting an appraisal) and know that most lenders limit LTV to 80% for cash-out refinances. Include all liens against the property.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical LTV limit?
A: Most conventional lenders allow up to 80% LTV for cash-out refinances, though some government programs may go higher.

Q2: Are there costs to refinancing?
A: Yes, expect 2-5% of loan amount in closing costs which may be rolled into the new loan.

Q3: When does cash-out make sense?
A: When you need funds for home improvements, debt consolidation, or investments and can get a better rate than alternatives.

Q4: How does this affect my mortgage?
A: Your loan amount increases and terms reset - you'll have a new interest rate and repayment period.

Q5: What if my cash amount is negative?
A: This means you don't have sufficient equity for a cash-out refinance with the entered parameters.