Cash Out Refinance

Cash-Out Refinance
Use Your Home’s Equity to Your Advantage

A cash-out refinance lets you replace your current mortgage with a new one for a larger amount—giving you access to the difference in cash. Use your home’s built-up equity to fund renovations, pay off debt, or cover major expenses.

Your home is one of your most valuable assets, and over time, as you pay down your mortgage and your home’s value increases, you build equity. A cash-out refinance allows you to tap into that equity, giving you access to cash that can be used for things like home renovations, paying off high-interest debt, covering education expenses, or making other major investments.

How Does a Cash-Out Refinance Work?

A cash-out refinance replaces your current mortgage with a brand new loan that’s larger than what you currently owe. The difference between your old loan balance and your new loan amount is paid to you in cash.

For example, if your home is worth $300,000 and you still owe $200,000 on your mortgage, you may be able to refinance for $250,000. After paying off your original loan, you would receive $50,000 in cash at closing. Of course, the exact amount you can borrow depends on how much equity you have and your lender’s guidelines.

Most lenders allow you to borrow up to 80% of your home’s value, meaning you’ll typically need to leave at least 20% equity in your home after the refinance.

Why Consider a Cash-Out Refinance?

One of the biggest reasons homeowners choose a cash-out refinance is to access large amounts of cash at a much lower interest rate than most credit cards or personal loans. If you have high-interest debt, consolidating it into your mortgage can simplify your finances and potentially lower your overall monthly payments.

Many homeowners also use the funds for home improvements. Investing in your property not only helps you enjoy your home more but can also increase its value over time.

In some cases, homeowners refinance simply to secure a better interest rate, especially if rates have dropped since they originally purchased their home. As of mid-2025, cash-out refinance rates average around 6.8% to 6.9% for 30-year fixed loans, depending on your credit and qualifications.

What Are the Costs?

You’ll owe more on your mortgage, and your monthly payment may be higher.
Closing costs can be substantial (typically 2–6% of the new loan).
You’re resetting your loan clock, which could extend your time in debt.
Risk of foreclosure increases if you can’t make payments on the larger loan.

Is a Cash-Out Refinance Right for You?

A cash-out refinance may be a smart move if you have a clear financial goal, like consolidating high-interest debt or funding a renovation that will add long-term value to your home. It can also make sense if you’re able to secure a competitive interest rate and comfortably afford the new monthly payment.

However, it’s not ideal for everyone. If you plan to sell your home soon, don’t have enough equity, or are uncomfortable increasing your total debt, you may want to explore other financing options like a home equity loan or a home equity line of credit (HELOC), which might offer more flexibility without fully refinancing your entire mortgage.