Use this calculator to estimate how much cash you might be able to take out from your home equity through a cash-out refinance, and what your new loan amount could be. This tool helps you understand the financial implications of leveraging your home's value.
Typical cash-out LTVs range from 70% to 85%.
Commonly 2-5% of the new loan amount.
Understanding Cash-Out Refinancing
A cash-out refinance allows homeowners to convert a portion of their home equity into liquid cash. This is achieved by taking out a new, larger mortgage than your current outstanding balance, and receiving the difference in cash. The new mortgage then replaces your old one, typically with a new interest rate and loan term.
How It Works
When you opt for a cash-out refinance, a lender assesses your home's current market value. They then determine the maximum loan amount they are willing to offer based on a Loan-to-Value (LTV) ratio. For cash-out refinances, this LTV is usually lower than for a standard purchase or rate-and-term refinance, often capping around 70% to 85% of your home's value. The new loan pays off your existing mortgage, covers closing costs, and the remaining funds are disbursed to you as cash.
Key Factors Influencing Your Cash Out Amount
Current Home Value: The higher your home's appraised value, the more equity you potentially have available.
Current Mortgage Balance: The less you owe on your existing mortgage, the more equity you've built up.
Maximum Loan-to-Value (LTV) Ratio: This is the percentage of your home's value that a lender is willing to finance. For cash-out refinances, lenders are more conservative to mitigate risk.
Closing Costs: These are fees associated with originating the new loan, including appraisal fees, title insurance, lender fees, and more. They are typically rolled into the new loan amount, reducing the net cash you receive.
When to Consider a Cash-Out Refinance
Homeowners often use cash-out refinances for various purposes:
Debt Consolidation: Paying off high-interest credit card debt or personal loans.
Home Improvements: Funding renovations that can increase your home's value.
Education Expenses: Covering tuition costs for college or other educational pursuits.
Investment Opportunities: Funding other investments, though this carries its own risks.
Important Considerations
While a cash-out refinance can provide significant funds, it's crucial to understand that you are increasing your mortgage debt. This means higher monthly payments and potentially a longer repayment period. It's essential to have a clear plan for how you will use the cash and ensure you can comfortably afford the new mortgage payments. Always compare offers from multiple lenders and consult with a financial advisor to determine if a cash-out refinance is the right financial move for your situation.
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function calculateCashOutRefi() {
var currentHomeValue = parseFloat(document.getElementById('currentHomeValue').value);
var currentMortgageBalance = parseFloat(document.getElementById('currentMortgageBalance').value);
var maxLTV = parseFloat(document.getElementById('maxLTV').value);
var closingCostsPercentage = parseFloat(document.getElementById('closingCostsPercentage').value);
var resultDiv = document.getElementById('result');
// Input validation
if (isNaN(currentHomeValue) || currentHomeValue <= 0) {
resultDiv.innerHTML = 'Please enter a valid current home value.';
return;
}
if (isNaN(currentMortgageBalance) || currentMortgageBalance = currentHomeValue) {
resultDiv.innerHTML = 'Current mortgage balance must be less than the current home value to have equity.';
return;
}
if (isNaN(maxLTV) || maxLTV 100) {
resultDiv.innerHTML = 'Please enter a valid maximum LTV (1-100%).';
return;
}
if (isNaN(closingCostsPercentage) || closingCostsPercentage 100) {
resultDiv.innerHTML = 'Please enter a valid closing costs percentage (0-100%).';
return;
}
// Convert percentages to decimals
var maxLTVDecimal = maxLTV / 100;
var closingCostsDecimal = closingCostsPercentage / 100;
// Calculations
var maxAllowedLoan = currentHomeValue * maxLTVDecimal;
var estimatedClosingCosts = maxAllowedLoan * closingCostsDecimal;
var potentialCashOut = maxAllowedLoan – currentMortgageBalance – estimatedClosingCosts;
var newLoanAmount = maxAllowedLoan; // The new loan will be up to the max allowed LTV
var remainingHomeEquity = currentHomeValue – newLoanAmount;
// Format results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
var formattedMaxAllowedLoan = formatter.format(maxAllowedLoan);
var formattedEstimatedClosingCosts = formatter.format(estimatedClosingCosts);
var formattedPotentialCashOut = formatter.format(potentialCashOut);
var formattedNewLoanAmount = formatter.format(newLoanAmount);
var formattedRemainingHomeEquity = formatter.format(remainingHomeEquity);
var resultsHTML = '
Cash-Out Refinance Estimate
';
if (potentialCashOut <= 0) {
resultsHTML += 'Based on your inputs, you may not be able to take cash out, or the amount would be negligible after closing costs.';
resultsHTML += 'Maximum Allowed New Loan:' + formattedMaxAllowedLoan + '';
resultsHTML += 'Estimated Closing Costs:' + formattedEstimatedClosingCosts + '';
resultsHTML += 'Remaining Home Equity:' + formattedRemainingHomeEquity + '';
} else {
resultsHTML += 'Maximum Allowed New Loan:' + formattedMaxAllowedLoan + '';
resultsHTML += 'Estimated Closing Costs:' + formattedEstimatedClosingCosts + '';
resultsHTML += 'Maximum Cash Out Available:' + formattedPotentialCashOut + '';
resultsHTML += 'Remaining Home Equity:' + formattedRemainingHomeEquity + '';
}
resultDiv.innerHTML = resultsHTML;
}