How Much Can You Get on a Cash-out Refinance?

How Much Can You Get on a Cash-out Refinance?
After figuring out what a cash-out refinance is and the financial benefits it can offer, one may be left with one important question – how much can I get from a cash-out refi? For most conventional cash-out refinance loans, homeowners are only allowed to borrow at most 80% of their home value. This is what is referred to as the loan to value ratio.   

Here is an example to help understand how this works; 

Your home is valued at $300,000. You will need an appraiser to get an accurate figure. The maximum loan amount you can get from that value is 80% of $300,000, equivalent to $240,000. Assuming that you have a mortgage balance of $200,000, the maximum cash-out you can get is $40,000.  Please note that various lenders have different loan-to-value ratios. It can be more or less than 80%. Also, as you will see later on, the different types of cash-out refi loans have varying loan-to-value ratios.  From this example, you can see that this homeowner has equity of $100,000. We got this figure by subtracting the mortgage balance of $200,000 from the current home value of $300,000. However, because of the loan to value ratio, which requires a certain amount of home equity (mostly ranging around 20%) to be left untouched, you can only cash out $40,000.  It’s essential to understand how these things work so that you can know how much to expect. Also, for homeowners that have taken a second mortgage from the home’s equity, that amount should be subtracted from the available cash-out.   

What are the Current Cash-out Refinance Rates? 

Generally, cash-out refinance rates tend to be slightly higher than those of no-cash-out refinance. However, the rates you will get for a cash-out refi depend on several factors.  First, the credit score of a homeowner significantly affects the rates. Higher credit scores attract lower rates. Another factor that affects the cash-out refi loan is the amount of equity you want to cash out. As you’ shop’ around for cash-out refinance loans, you should inquire about the rates from different lenders and compare until you find one that is favorable.   

Different Types of Cash-out Refinance Loans and How Much You May Get from Each

1.    Conventional Cash-out Refinance Loans 

These are loans whose guidelines are set by Freddie Mac and Fannie Mae. With these, you can cash out around 80% of your home value.   

2.    FHA Loans 

Cash-out refinance loans backed by the Federal Housing Administration allow you to borrow up to 80% of home value. They, however, come with an added benefit. You can qualify for these loans with a low credit score of around 500.   

3.    VA Loans 

These are meant for veterans and have a higher borrowing limit of up to 90%. VA loans don’t require payment for mortgage insurance.   

Additional Costs You Should Be Aware Of 

Credit scores and loan to value ratios aren’t the only things that affect how much you can get from a cash-out refi. It’s crucial to also factor in closing costs. These entail credit report costs, appraisal fees, and depending on the state your home is located in, you may have to cater for attorney fees. For homeowners interested in borrowing a very small amount from their equity, you need to compare whether it’s worth the closing costs.    When it comes to cash-out refinance, you need to know that it’s impossible to cash out all of your home equity. It will be capped at a certain percentage, and you need to be aware of closing costs. 

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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