Cash-Out Refinance: Replace Your Mortgage and Take Equity as Cash
A cash-out refinance replaces your current mortgage with a new one—then gives you the difference in cash (after paying off the old balance). It can be appealing when you want one loan, one payment, and a structured long-term plan, especially if the overall pricing and terms make sense for your situation.
This page helps you evaluate cash-out refinance the right way: not just “can I get cash,” but “what does it do to my mortgage timeline, total interest, and monthly payment?” If you haven’t estimated your equity yet, start with the Home Equity Checker or run numbers using the Home Equity Calculator.
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One mortgage, one payment
Instead of adding a second loan, you replace the mortgage and cash out equity in a single new mortgage.
Long-term strategy move
It can make sense when the new mortgage terms align with your budget and your future plans for the home.
Cash for big priorities
Common uses include major renovations, consolidating higher-rate balances, or funding large planned expenses.
How Cash-Out Refinance Works (Simple Example)
Think of cash-out refinance as “mortgage reset + cash.” Your new mortgage pays off the old mortgage, and the remaining amount is paid to you as cash. Because it’s a mortgage, you’ll typically see closing costs and underwriting similar to a standard refinance.
| Item | Example | What it means |
|---|---|---|
| Estimated home value | $500,000 | Used to calculate loan-to-value (LTV) |
| Current mortgage balance | $300,000 | What the new loan must pay off |
| New mortgage amount | $380,000 | Old balance + cash-out + (sometimes) financed costs |
| Cash to you (before costs) | $80,000 | Funds received after payoff, subject to closing costs |
Want to run your real numbers? Use the Home Equity Calculator.
Compare Offers Without Missing the Real Cost
The biggest mistake with cash-out refinance is ignoring the full mortgage math. Focus on the total package: your monthly payment, total interest over time, closing costs, and whether the refinance resets your payoff horizon.
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Rate + APR
APR helps reflect fees; compare APR when offers have different closing-cost structures.
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Term reset (15/20/30 years)
A lower payment can come from stretching the term—check the long-run interest trade-off.
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Closing costs + points
Know what you pay upfront vs what’s rolled into the loan. Both affect cost in different ways.
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Break-even mindset
If you may move soon, high closing costs might not pay off—consider your time horizon.
When Cash-Out Refi Is Usually a Stronger Choice
Cash-out refinance often shines when you want to simplify into one mortgage and you’re comfortable with the new payoff timeline. It can also be compelling when your overall mortgage structure improves: perhaps you want to change term length, remove mortgage insurance, or align your payment with your long-range budget.
It’s usually weaker when you need flexibility (a HELOC may fit better) or when the closing costs overwhelm the benefit. If you only need a specific lump sum and want predictable repayment without rewriting the entire mortgage, a fixed Home Equity Loan can be a cleaner path.
Reminder: borrowing against your home has risk—missed payments can put the home at risk of foreclosure.
Quick FAQs
Is cash-out refinance the same as a home equity loan?
No. Cash-out refinance replaces your primary mortgage. A home equity loan is typically a second loan on top of your existing mortgage.
Will it change my mortgage payment?
Usually, yes—because you’re creating a new mortgage with a new balance, rate, and term.
What if I want access to funds over time?
That’s a common HELOC use case. Compare on the HELOC page.
Want the quick estimate first? Use the Home Equity Calculator.