1. What is Cash Out Refinance?

A cash-out refinance replaces your existing mortgage with a new, larger loan, allowing you to receive the difference in cash. This calculator estimates how much you could get at 80% loan-to-value (LTV) ratio.

2. How Does the Calculator Work?

The calculator uses the cash-out formula:

Where:

• \( \text{Home Value} \) — Current market value of your home
• \( 0.80 \) — Standard 80% loan-to-value ratio
• \( \text{Old Balance} \) — Remaining balance on your current mortgage

Explanation: Most lenders allow cash-out refinancing up to 80% of your home's value, minus what you still owe.

3. Importance of 80% LTV

Details: The 80% LTV ratio is significant because it typically allows you to avoid private mortgage insurance (PMI) and often gets you the best interest rates.

4. Using the Calculator

Tips: Enter your home's current market value and remaining mortgage balance. For most accurate results, use a recent professional appraisal for home value.

5. Frequently Asked Questions (FAQ)

Q1: Why 80% LTV?
A: 80% is the standard maximum for conventional loans to avoid PMI and get best rates. Some lenders may go higher but with added costs.

Q2: How accurate is this estimate?
A: This provides a basic estimate. Actual amounts depend on lender requirements, credit score, and other factors.

Q3: What costs aren't included?
A: Closing costs (typically 2-5% of loan amount) and potential prepayment penalties aren't factored in this calculation.

Q4: When does cash-out refinance make sense?
A: When you need funds for home improvements, debt consolidation, or major expenses, and current rates are favorable.

Q5: Are there alternatives to cash-out refinance?
A: Yes, home equity loans or HELOCs might be better options depending on your situation and current rates.