Cash-Out Refinance | Tap Home Equity

If you have built up equity in your home, a cash-out refinance is one of the most direct ways to turn some of it into usable cash. You replace your current mortgage with a new, larger loan, the old mortgage is paid off at closing, and you receive the difference. Homeowners use that cash to pay off high-interest debt, finance a remodel, put money toward another property, or cover a large expense without opening a separate loan on top of the mortgage.

Christopher Hovenier works with homeowners in Arizona, California, Colorado, Florida, Idaho, Michigan, New Mexico, Tennessee, Texas and Virginia. Because he works with a range of lenders and loan programs through E Mortgage Capital, he can compare options for your situation instead of quoting one product and calling it a day.

How a Cash-Out Refinance Works

Your home is valued. An appraisal or valuation sets the number everything else is measured against.
Your new loan amount is set. It covers your current mortgage balance, closing costs, and the cash you want to take out, within the program's limit.
Your old mortgage is paid off. The new loan replaces it, with its own rate, term and monthly payment.
You receive the difference. The cash arrives at closing, and you decide how to use it.

Common Reasons Homeowners Choose It

Paying off high-interest debt. Credit cards, personal loans and medical bills often carry much higher rates than a mortgage. Read our honest look at using home equity to pay off debt before you decide.
Home improvement. Kitchens, roofs, additions, pools and energy upgrades can add comfort and sometimes value.
Investing. Some owners use equity as a down payment on a rental or another property.
Major expenses. Education costs, a business need or a large one-time bill.

Cash-Out Refinance vs. HELOC vs. Home Equity Loan

All three borrow against your home, but they work differently. A cash-out refinance replaces your first mortgage. A HELOC is a revolving credit line added on top of it, and a home equity loan (HELOAN) is a fixed, one-time second loan added on top of it. If your current mortgage rate is one you want to keep, adding a second loan can make more sense than replacing the first one. If you want a single payment, a refinance may fit better. Our home equity comparison guide lays all four options side by side, including the reverse mortgage for homeowners 62 and older.

What Lenders Look At

The value of your home and how much you owe on it
Equity remaining after the new loan, since most programs limit how much of the value you can borrow against
Credit history and score
Income, employment and your debt-to-income ratio
How the home is used: primary residence, second home or investment property can each have different rules

Costs and Trade-Offs to Weigh

A cash-out refinance is not free money, and it is not right for everyone. Be sure to weigh these points before you move forward:

Your balance goes up. You owe more than before, and you pay interest on the cash you take out for the life of the loan.
Your rate and term reset. If your current mortgage has a rate you like, giving it up has a real cost.
Closing costs apply. They can be significant, so compare the total cost, not just the monthly payment.
Your home secures the loan. If you cannot make payments, you could lose the home.
A lower payment is not always a lower total cost. Stretching debt over 30 years can mean paying more interest overall, even at a lower rate.

Christopher will walk through those numbers with you and will tell you if a different option fits better, including leaving things as they are.

Who a Cash-Out Refinance Is Best For

Homeowners with meaningful equity who want one loan and one monthly payment
Owners whose current mortgage rate is not one they are trying to protect
Borrowers with a specific, planned use for the cash
Homeowners comfortable adding to their mortgage balance in exchange for a defined benefit

Where We Offer It

Christopher is licensed to help homeowners in Arizona, California, Colorado, Florida, Idaho, Michigan, New Mexico, Tennessee, Texas, and Virginia. Rates, terms and eligibility vary by state, property type and borrower, so call or send a request and he will tell you what is realistic for your home.

Frequently Asked Questions

What is a cash-out refinance?

A cash-out refinance replaces your current mortgage with a new, larger one and pays you the difference in cash at closing. You end up with one mortgage payment instead of a mortgage plus separate loans, but a bigger balance secured by your home.

How much cash can I take out of my home?

It depends on your home's appraised value, what you owe today, the loan program's limit on how much of the value you can borrow against, and your credit and income. Many programs require you to keep some equity in the home after closing, so Christopher can estimate a realistic range once he knows your property and your numbers.

Can I use a cash-out refinance to pay off credit cards?

Yes, many homeowners do. The trade-off is that you are turning unsecured debt into debt secured by your home, so missing payments could put the home at risk. It works best when you have a plan to avoid running the cards back up, and it is worth comparing it with other options such as nonprofit credit counseling first.

Is a cash-out refinance better than a HELOC or home equity loan?

It depends on your current mortgage and your goal. If your existing first mortgage has a rate you like, a HELOC or home equity loan lets you keep it. If you want one loan, one payment, and your current rate is not something you are trying to protect, a cash-out refinance may make more sense.

What does a cash-out refinance cost?

Expect closing costs similar to other refinances, which can include lender fees, an appraisal, title and settlement charges, and prepaid items. Costs vary by loan and state, and you will receive a Loan Estimate that spells them out before you commit to anything.

Which states do you offer cash-out refinancing in?

Christopher is licensed in Arizona, California, Colorado, Florida, Idaho, Michigan, New Mexico, Tennessee, Texas and Virginia. Availability and terms vary by state and property, so call to confirm what applies to your home.

Home equity products are secured by your home. If you cannot repay the loan, you could lose your home. Availability, terms and eligibility vary by state, property and borrower, and all loans are subject to credit and underwriting approval. This is not a commitment to lend. Christopher Hovenier, NMLS #1404324, E Mortgage Capital, Inc. NMLS #1416824.

Cash-Out Refinance — Turn Home Equity Into Cash