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Mortgage Refinance Formula:
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Mortgage refinance with cash out allows homeowners to replace their existing mortgage with a new, larger loan and receive the difference in cash. This is often done to access home equity for renovations, debt consolidation, or other financial needs.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: The formula calculates the fixed monthly payment required to fully amortize the new loan amount (current balance plus cash out) over the specified term.
Details: Calculating the new payment helps determine if refinancing makes financial sense by comparing the new payment to your current payment and considering closing costs.
Tips: Enter current mortgage balance, desired cash out amount, new interest rate (as decimal), and new loan term in months. All values must be positive numbers.
Q1: What are typical closing costs for cash-out refinance?
A: Closing costs typically range from 2% to 5% of the loan amount and include appraisal fees, origination fees, and title insurance.
Q2: How does cash-out refinance affect my equity?
A: It reduces your home equity because you're increasing your loan amount while your home value remains the same.
Q3: What's the difference between rate-and-term and cash-out refinance?
A: Rate-and-term only changes interest rate and/or term, while cash-out also provides additional funds to the borrower.
Q4: Are there tax implications for cash-out refinance?
A: Interest may be deductible if funds are used for home improvements (consult a tax professional for your situation).
Q5: What loan-to-value (LTV) ratios are typical?
A: Most lenders allow up to 80% LTV for cash-out refinance, meaning you must maintain at least 20% equity.