Cash-Out Refinance Process: Step-by-Step Guide
3 minute read
·
July 9, 2025

Share

Refinancing your mortgage can unlock valuable cash from your home’s equity. A cash-out refinance lets you replace your existing mortgage with a new, larger one and take the difference in cash — a popular strategy for debt consolidation, home renovations, or major expenses.

In this guide, we walk you through the cash-out refinance process step-by-step, helping you determine if it’s right for you and how to prepare for a smooth experience.


What Is a Cash-Out Refinance?

A cash-out refinance replaces your current mortgage with a new one for more than you owe, allowing you to withdraw the difference in cash. Unlike a traditional refinance that simply changes your rate or term, a cash-out refinance taps into your home equity to provide liquidity.


Get Expert Financing

  • Matched with investor-friendly lenders
  • Fast pre-approvals-no W2s required
  • Financing options fro rentals, BRRRR, STRs
  • Scale your portfolio with confidence

Step-by-Step Guide to the Cash-Out Refinance Process

1. Assess Your Financial Goals and Equity

Before applying, consider:

  • How much equity you currently have (typically need at least 20%)
  • Your credit score, debt-to-income ratio, and home value
  • Why you’re taking cash out: e.g., home improvement, debt consolidation, tuition

2. Compare Lenders and Loan Options

Rates and fees vary. Shop around and request quotes from multiple lenders to compare:

  • Interest rates (fixed vs. adjustable)
  • Loan terms
  • Closing costs and fees
  • Cash-out limits

Pro Tip: Lenders typically let you borrow up to 80% of your home’s appraised value (minus your current mortgage balance).

3. Submit Your Application

Once you’ve chosen a lender:

  • Complete the application (can often be done online)
  • Provide documentation:
    • Income verification (W-2s, pay stubs)
    • Asset information (bank statements)
    • Credit history
    • Property details

4. Underwriting and Appraisal

The lender reviews your:

  • Credit score and financial profile
  • Employment status
  • Debt-to-income ratio
  • Property value (via home appraisal)

This step ensures you meet requirements and the home value supports the new loan amount.

5. Receive Loan Estimate and Final Approval

You’ll receive a Loan Estimate outlining:

  • Loan amount
  • Interest rate
  • Monthly payments
  • Closing costs

Once underwriting is complete and appraisal supports your equity, you’ll receive a Clear to Close.

6. Closing and Receiving Funds

At closing:

  • Sign final loan documents
  • Pay any closing costs (can sometimes be rolled into the loan)
  • Existing mortgage is paid off
  • Cash-out funds are disbursed (typically within a few days)

Note: There’s a 3-day right of rescission for owner-occupied homes before funds are released.


Pros and Cons of Cash-Out Refinancing

ProsCons
Lower interest rates than personal loansClosing costs can be high
Access to large sums of moneyResets your mortgage term
Potential tax benefits (if used for home improvements)Risk of foreclosure if you can’t repay

FAQs About Cash-Out Refinancing

What’s the minimum credit score for a cash-out refinance?

Most lenders prefer a score of 620 or higher, though better scores often get lower rates.

How long does the process take?

From application to closing, expect 30–45 days, depending on your lender and documentation.

Can I do a cash-out refinance with an FHA or VA loan?

Yes. FHA and VA offer cash-out options, but with specific guidelines and loan-to-value limits.

Is Cash-Out Refinancing Right for You?

It depends on your financial goals. If you need funds for a high-return project like home renovations, or to consolidate high-interest debt, cash-out refinancing can be a smart tool — especially with today’s still-competitive mortgage rates.


Read Next

  • Refinance vs. Home Equity Loan: Which Is Better for You?
  • Home Appraisal Tips: How to Maximize Your Home’s Value
  • 5 Ways to Use Your Home Equity Wisely

Get Expert Financing

  • Matched with investor-friendly lenders
  • Fast pre-approvals-no W2s required
  • Financing options fro rentals, BRRRR, STRs
  • Scale your portfolio with confidence

Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

Share


More on General