Can I Sell My Home After a Cash-out Refinance?

Of course you can sell your house after a cash-out refinance. Although, it can be beneficial to plan out accordingly. It can be very tempting to sell your home after a cash-out refinance. With the money taken from the home equity, you can perform repairs or even upgrade your home and increase its market value. But, it’s not always a good idea to sell your home after a cash-out refinance. Also, there are several obstacles you may face in the process.   

What Challenges Can Homeowners Face When Selling a Home after Cash-out Refi?  

Even though no law dictates when you can or can’t sell your home, some lenders can restrict how soon you can do this.   

1.    Through Owner-occupancy Clauses 

If you accept the owner-occupancy clause in your cash-out refinance agreement, you may not be able to sell the home within the first six to twelve months. Selling your home yet you agreed to this owner-occupancy clause can trigger legal problems with the lender. If selling your home is the end goal, look for a lender that doesn’t enforce this clause in its terms. Suppose you find yourself in such a scenario, with a valid reason, the lender can overlook this clause.   

2.    Through Prepayment Penalties 

Certain lenders have a prepayment penalty where borrowers are charged for paying off the loan early. This, in most cases, is within the first three years. Prepayment penalties aren’t very popular these days, but you need to confirm before selling your home after a cash-out refi.   

Is It Advisable to Take a Cash-out Refinance Before Selling? 

The above are the two main roadblocks you may face when selling a home after taking a cash-out refi. But these obstacles aren’t the only things you should be worried about. There are pros and cons of taking a cash-out refinance before selling a home.  A cash-out refinance can be a great idea if you want to renovate your home before selling it. The money borrowed from the equity can be used for repairs and renovations to boost your home’s value. Also, a cash-out refinance can help you find a better interest rate on monthly mortgages. As a result, homeowners can save more money while preparing to sell.  As great as a cash-out refi is, certain drawbacks dawn in when you sell your home. First, you need to know that taking a cash-out refi doesn’t make financial sense if you are going to sell your home immediately. There are closing fees associated with a cash-out refi. They include application, appraisal, inspection and insurance costs. These accumulate to around 2% to 5% of the loan balance.   


Assuming that you paid $4,000 in closing costs and the new mortgage has decreased your monthly payments by $200. You will need to stay in that home for twenty months to reach a break-even point.  Also, these closing costs can take a chunk out of your savings and make it harder to come up with a down payment for your new home. The best decision will be not to refinance if you plan to move homes.  If you think that a no-closing cost cash-out refinance is better, please note that these fees will be added to your new mortgage, and you will eventually have to pay for them at a higher rate.   

Should I Take a Cash-out Refinance If I Plan to Sell? 

How soon you plan to sell your house determines whether a cash-out refinance will be beneficial or not. If you plan to sell in the next five years, a cash-out refi will help you utilize your home equity to make repairs, renovations, consolidate debt and pay for other expenses. At the same time, you will benefit from better interest rates and mortgage terms. But if you plan on selling the home this coming season, a cash-out refinance won’t be worth the expenses, effort and time. Even though you can sell your home anytime you want after taking a cash-out refinance. It’s important to run the numbers and determine if it’s worth it.

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.



V.I.P. Mortgage, Inc. DBA Spire Financial does Business in Accordance with Federal Fair Lending Laws. NMLS ID 145502. For state specific licensing, visit V.I.P. Mortgage, Inc. is not acting on behalf of or at the direction of the FHA/HUD or the Federal Government. This product or service has not been approved or endorsed by any governmental agency, and this offer is not being made by any agency of the government. V.I.P. Mortgage, Inc. is approved to participate in FHA programs but the products and services performed by V.I.P. Mortgage, Inc. are not coming directly from HUD or FHA. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions may apply. This is not an offer to enter into an agreement. Not all customers will qualify.

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