Fact-Checked and Reviewed by: David Chen, CFA
Use this comprehensive calculator to estimate your new monthly mortgage payment and the net cash you could receive after refinancing your home with a cash-out option.
Refinance with Cash Out Mortgage Calculator
Your Estimated Refinance Results
New Estimated Monthly Payment (P&I)
Net Cash Out Received
Refinance with Cash Out Mortgage Calculator Formula
The primary calculation is the Monthly Payment (P&I) using the standard amortization formula:
PMT = P * [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]
Where:
P = Principal (Desired New Loan Amount)
r = Monthly Interest Rate (Annual Rate / 12 / 100)
n = Total Number of Payments (Loan Term in Years * 12)
Formula Sources: Investopedia – Mortgage Payment, CFPB – Mortgage Tools
Variables Explained
- Estimated Home Value: The current market price of your property, typically determined by an appraisal.
- Current Mortgage Balance: The remaining principal you owe on your existing mortgage.
- Desired New Loan Amount: The total amount you wish to borrow, which must cover your current balance, closing costs, and the cash-out amount.
- New Annual Interest Rate (%): The interest rate you expect to secure with the new loan.
- New Loan Term (Years): The duration of the new mortgage, often 15 or 30 years.
- Estimated Closing Costs ($): The fees associated with closing the new loan (appraisal, title, origination fees, etc.).
- Lender Max LTV (%): The maximum Loan-to-Value ratio your lender permits for a cash-out refinance (e.g., 80%).
Related Calculators
Explore other financial tools to plan your mortgage strategy:
- Home Equity Loan Calculator
- Mortgage Amortization Schedule
- Loan Affordability Estimator
- Bi-Weekly Payment Savings Calculator
What is Refinance with Cash Out?
A cash-out refinance is a mortgage refinancing transaction where the new loan amount is higher than the outstanding balance of the current mortgage. The borrower takes the difference in cash at closing. This process replaces your old mortgage with a new one, often with a different rate and term.
Homeowners often use the cash proceeds for various purposes, such as funding home improvements, consolidating high-interest debt, or paying for college tuition. Crucially, the amount you can borrow is typically restricted by the Loan-to-Value (LTV) ratio—the loan amount cannot exceed a certain percentage (commonly 80%) of the home’s appraised value.
It’s important to factor in all costs, including closing costs, to determine the *net* cash you will actually receive and to ensure the transaction is financially beneficial after considering the new monthly payment.
How to Calculate Cash Out Refinance (Example)
- Determine the Maximum Loan Amount: Calculate your home value multiplied by the lender’s Max LTV percentage (e.g., $400,000 * 80% = $320,000).
- Calculate Gross Cash Out: Subtract your current mortgage balance from the desired new loan amount (e.g., $250,000 – $200,000 = $50,000).
- Calculate Net Cash Out: Subtract the estimated closing costs from the Gross Cash Out amount (e.g., $50,000 – $8,000 = $42,000).
- Calculate New Monthly Payment: Apply the desired new loan amount ($250,000), the new annual rate (6.5%), and the new term (30 years) to the standard PMT formula.
- Verify Compliance: Ensure your Desired New Loan Amount ($250,000) does not exceed the Maximum Loan Amount ($320,000).
Frequently Asked Questions (FAQ)
Is a cash-out refinance better than a home equity loan?
It depends. A cash-out refinance replaces your primary mortgage, potentially offering a lower rate since it’s secured by the first lien. A HELOC or home equity loan is a second lien with different payment structures, but it leaves your primary mortgage rate unchanged.
How is my cash-out amount determined?
It’s primarily limited by your home’s appraised value and the lender’s maximum LTV (Loan-to-Value) requirement, typically 80%. The maximum loan you can get is LTV * Home Value, and your cash out is the remainder after paying off the old loan and closing costs.
Are closing costs included in the new loan?
Yes, closing costs are often rolled into the new loan principal, meaning you pay interest on them over the life of the mortgage. This calculator, however, treats them as a deduction from the gross cash-out to show the *net* amount received by the homeowner.
What is the standard maximum LTV for a cash-out refinance?
For most conventional loans, the standard maximum LTV for a cash-out refinance is 80% of the home’s value, though some specific programs (like FHA or VA) or portfolio lenders may allow higher amounts.