How to Use a Bank Statement Loan for a Cash-Out Refinance

If you’re self-employed or have non-traditional income, accessing your home’s equity through a cash-out refinance can feel out of reach—especially if your tax returns don’t reflect your true earnings. That’s where bank statement loans come in.

This flexible financing option allows you to refinance your home and pull out cash—without submitting tax returns, W-2s, or pay stubs. Instead, lenders use your bank deposits to verify income.

In this guide, we’ll walk through how to use a bank statement loan for a cash-out refinance, how it works, who qualifies, and how to get started in 2025.

💵 What Is a Bank Statement Loan?

A bank statement loan is a type of Non-QM (non-qualified mortgage) that lets borrowers qualify based on the income shown in their bank statements, not tax returns.

Instead of requiring W-2s or pay stubs, lenders calculate your monthly income using 12 to 24 months of personal or business bank statements.

👉 Learn more in our full Bank Statement Loan Guide

🔁 What Is a Cash-Out Refinance?

A cash-out refinance replaces your current mortgage with a new, larger loan. The difference between your current balance and the new loan amount is returned to you as a lump-sum cash payout at closing.

Example:

• Home Value: $500,000
• Current Mortgage Balance: $300,000
• New Loan (at 75% LTV): $375,000
• Cash-Out Proceeds: $75,000 (before closing costs)

🧠 How a Bank Statement Cash-Out Refinance Works

1. Submit 12–24 months of bank statements (business or personal).
2. Lender calculates your average deposits and applies an expense factor to determine qualifying income.
3. A new loan is approved using this income instead of tax returns.
4. You receive a lump sum of cash at closing, and start making payments on the new mortgage amount.

📋 Bank Statement Cash-Out Refinance Requirements

🏡 Who Should Use a Bank Statement Loan for a Refinance?

This option is ideal for:

• Self-employed homeowners
• Small business owners or sole proprietors
• Freelancers and gig economy workers
• Commission-based earners (real estate agents, consultants)
• Anyone whose tax returns don’t reflect actual income

🔗 Explore Cash-Out Refinance options to compare conventional vs Non-QM pathways.

💡 Top Reasons to Do a Bank Statement Cash-Out Refinance

• Pay off high-interest debt
• Fund home renovations or upgrades
• Build or replenish emergency savings
• Invest in a new business or side hustle
• Pay for tuition or large upcoming expenses
• Bridge temporary cash flow needs

Because mortgage rates are typically lower than credit cards or personal loans, using equity wisely can lead to long-term savings.

📈 How Income Is Calculated with Bank Statements

Example:

• 12 months of bank statements show $20,000/month in deposits
• Lender applies 50% expense factor
• Qualifying income = $10,000/month

This income is then used to calculate your DTI and determine how much you can borrow.

👉 Estimate your numbers with our Affordability Calculator

✅ Benefits of Using Bank Statements for Cash-Out Refinancing

• No tax returns or W-2s required
• Flexible income verification for self-employed borrowers
• Use funds however you need (no restrictions)
• Can combine with jumbo loan programs
• Available for primary, second home, or investment properties

⚠️ Things to Consider

• Rates are typically higher than conventional loans
• Closing costs apply, like any refinance (2–5% of the loan amount)
• Lenders may impose prepayment penalties (especially on investment properties)
• Requires solid bank documentation and reserve funds

🛠️ How to Prepare for a Bank Statement Refinance

1. Organize your bank statements (personal or business) for the past 12–24 months.
2. Avoid overdrafts and NSF fees, which can raise red flags.
3. Maintain steady deposits—seasonal gaps can affect qualifying income.
4. Keep business and personal funds separate if possible.
5. Shop around with Non-QM lenders who understand self-employed borrowers.

🧾 FAQs

🔗 Related Resources

• Bank Statement Loan Guide
• Cash-Out Refinance Overview
• Loan Comparison Calculator
• What Is a Non-QM Loan?

📣 Final Thoughts

A bank statement cash-out refinance is a powerful solution for self-employed homeowners looking to unlock home equity—without jumping through tax return hoops. If you have consistent income flowing into your accounts, but can’t qualify the traditional way, this flexible Non-QM option could be your best move.