Use this calculator to estimate the potential new loan amount, monthly payments, and cash you could receive from a cash-out refinance. Understand how your home's value, existing mortgage, desired cash, and lender's LTV limits impact your refinance options.
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function calculateCashOutRefi() {
var currentHomeValue = parseFloat(document.getElementById('currentHomeValue').value);
var existingMortgageBalance = parseFloat(document.getElementById('existingMortgageBalance').value);
var cashDesired = parseFloat(document.getElementById('cashDesired').value);
var maxLTV = parseFloat(document.getElementById('maxLTV').value);
var newInterestRate = parseFloat(document.getElementById('newInterestRate').value);
var newLoanTerm = parseFloat(document.getElementById('newLoanTerm').value);
var closingCostsPercent = parseFloat(document.getElementById('closingCostsPercent').value);
var resultsDiv = document.getElementById('cashOutRefiResults');
resultsDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(currentHomeValue) || isNaN(existingMortgageBalance) || isNaN(cashDesired) ||
isNaN(maxLTV) || isNaN(newInterestRate) || isNaN(newLoanTerm) || isNaN(closingCostsPercent) ||
currentHomeValue <= 0 || maxLTV <= 0 || newLoanTerm currentHomeValue * (maxLTV / 100)) {
resultsDiv.innerHTML = 'The desired cash out and existing balance exceed the maximum loan allowed by your specified LTV.';
return;
}
// Convert percentages to decimals
var maxLTVDecimal = maxLTV / 100;
var closingCostsDecimal = closingCostsPercent / 100;
var monthlyInterestRate = (newInterestRate / 100) / 12;
var numberOfPayments = newLoanTerm * 12;
// Calculate the new total loan amount including closing costs
// N = (B + C) / (1 – P_cost)
var baseLoanAmount = existingMortgageBalance + cashDesired;
var newTotalLoanAmount = baseLoanAmount / (1 – closingCostsDecimal);
// Calculate maximum loan allowed based on LTV
var maxLoanAllowedByLTV = currentHomeValue * maxLTVDecimal;
// Check if the new total loan amount exceeds the LTV limit
if (newTotalLoanAmount > maxLoanAllowedByLTV) {
resultsDiv.innerHTML = 'The calculated new loan amount ($' + newTotalLoanAmount.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ') exceeds the maximum allowed by LTV ($' + maxLoanAllowedByLTV.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + '). Please adjust your desired cash out or LTV.';
return;
}
// Calculate monthly payment for the new loan
var monthlyPayment = 0;
if (monthlyInterestRate === 0) {
monthlyPayment = newTotalLoanAmount / numberOfPayments;
} else {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
monthlyPayment = newTotalLoanAmount * (monthlyInterestRate * factor) / (factor – 1);
}
// Display results
var resultsHTML = '
A cash-out refinance allows homeowners to convert a portion of their home equity into cash. This is achieved by taking out a new, larger mortgage that replaces your existing one. The difference between the new loan amount and your old mortgage balance (plus closing costs) is paid to you in cash at closing.
How It Works
When you do a cash-out refinance, you're essentially refinancing your current mortgage for a higher amount than you currently owe. The extra funds are then given to you as a lump sum. This process leverages the equity you've built in your home through principal payments and appreciation in property value.
Common Uses for Cash-Out Funds
Home Improvements: Funding renovations or repairs that can increase your home's value.
Debt Consolidation: Paying off high-interest debts like credit cards or personal loans, potentially at a lower interest rate.
Education Expenses: Covering tuition or other costs for college or higher education.
Investment Opportunities: Using the cash for other investments, though this carries its own risks.
Key Factors to Consider
Several factors influence whether a cash-out refinance is a good option for you:
Home Equity: Lenders typically require you to maintain a certain amount of equity in your home after the refinance, often expressed as a maximum Loan-to-Value (LTV) ratio (e.g., 80% LTV means your new loan cannot exceed 80% of your home's value).
Interest Rates: The new mortgage will come with a new interest rate. It's crucial to compare this to your current rate and the rates on any debt you plan to consolidate.
Closing Costs: Refinancing involves closing costs, which can range from 2% to 5% of the new loan amount. These can often be rolled into the new loan, increasing your principal.
Loan Term: You'll choose a new loan term, which could be shorter or longer than your remaining term on your old mortgage. A longer term might mean lower monthly payments but more interest paid over the life of the loan.
Credit Score: A good credit score is essential for securing favorable interest rates.
Benefits and Risks
Benefits: Access to a large sum of cash, potentially lower interest rates than other loan types (like personal loans), and tax deductibility of mortgage interest (consult a tax advisor).
Risks: You're taking on a larger loan, increasing your monthly payments, and extending the loan term. If home values decline, you could end up owing more than your home is worth. Your home is also collateral, meaning you could lose it if you fail to make payments.
Using the Calculator
Our Cash-Out Refinance Calculator helps you quickly estimate the financial implications. Input your current home value, existing mortgage balance, the amount of cash you wish to receive, and the lender's maximum LTV. You'll also need to input the estimated new interest rate and loan term, along with any closing costs. The calculator will then provide an estimate of your new total loan amount, maximum loan allowed by LTV, and your new estimated monthly payment, helping you make an informed decision.