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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.
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.
Before applying, consider:
Rates and fees vary. Shop around and request quotes from multiple lenders to compare:
Pro Tip: Lenders typically let you borrow up to 80% of your home’s appraised value (minus your current mortgage balance).
Once you’ve chosen a lender:
The lender reviews your:
This step ensures you meet requirements and the home value supports the new loan amount.
You’ll receive a Loan Estimate outlining:
Once underwriting is complete and appraisal supports your equity, you’ll receive a Clear to Close.
At closing:
Note: There’s a 3-day right of rescission for owner-occupied homes before funds are released.
Pros | Cons |
Lower interest rates than personal loans | Closing costs can be high |
Access to large sums of money | Resets your mortgage term |
Potential tax benefits (if used for home improvements) | Risk of foreclosure if you can’t repay |
Most lenders prefer a score of 620 or higher, though better scores often get lower rates.
From application to closing, expect 30–45 days, depending on your lender and documentation.
Yes. FHA and VA offer cash-out options, but with specific guidelines and loan-to-value limits.
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.
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.