Cash-Out Refinance Calculator
Work out the true cost of taking cash out of your home: the new payment, what the cash actually costs you over the loan, and the blended rate you end up paying.
How to use this calculator
- 1Enter your home value, current balance, rate and years remaining.
- 2Enter the cash you want to release, the new rate quoted and the new term.
- 3Set closing costs — 2–5% of the loan is typical, and they are usually rolled into the balance.
- 4Look at the cost-per-dollar figure. If it is high, compare it against a home equity loan that leaves your first mortgage alone.
How the calculation works
New loan = current balance + cash out + closing costs. Cost of cash = extra lifetime interest + closing costs- cost of cash
- Everything you pay above simply keeping the existing mortgage — the real price of releasing equity
- LTV
- New loan divided by home value. Most cash-out refinances are capped at 80%
The decisive point is that the new rate applies to the entire balance, not just the cash released. Refinancing a $250,000 loan at 3.5% into a $330,000 loan at 6.75% to release $80,000 re-prices the original $250,000 as well, which is usually the largest cost in the transaction.
Resetting a 25-year remaining term back to 30 years lowers the payment while increasing total interest. A lower monthly figure after a cash-out refinance is often a term effect, not a saving.
Where the existing rate is well below current rates, a second-lien home equity loan or HELOC usually costs far less overall, because the low first mortgage is left untouched.
Worked example
Releasing $80,000 while giving up a 3.5% rate
- 1.The new loan is $250,000 + $80,000 + about $9,900 of closing costs ≈ $339,900 — roughly 68% LTV.
- 2.The old payment on $250,000 at 3.5% over 25 years is about $1,252.
- 3.The new payment on $339,900 at 6.75% over 30 years is about $2,204.
- 4.The 6.75% now applies to the whole balance, including the $250,000 that was costing 3.5% — which is where most of the extra cost comes from.
Result: Very expensive cash — a HELOC would likely cost far less
Why the rate on the whole balance is the real cost
A cash-out refinance replaces your existing mortgage with a larger one and hands you the difference. It is often presented as a cheap way to borrow because mortgage rates are lower than credit cards or personal loans — and against those, it is.
The comparison that actually matters, though, is against your existing mortgage. If you hold a 3.5% loan and refinance the whole thing at 6.75% to release some equity, you have not borrowed the new money at 6.75%. You have re-priced your entire balance at 6.75%. The effective rate on the cash alone, once you account for the extra interest now being paid on the original balance, can be enormous — frequently double the headline rate or worse.
This is why the calculation here reports the total extra cost and a cost-per-dollar-released figure rather than just the new payment. A new payment tells you what you can afford; the cost of the cash tells you whether it was a good idea.
When a cash-out refinance does make sense
There are situations where it is genuinely the right structure, and situations where a second lien is clearly better.
- Rates have fallen since you borrowed — if the new rate is at or below your existing one, the refinance stands on its own merits and the cash is close to free. This is the ideal case and the only one where the arithmetic is straightforward.
- You are consolidating far more expensive debt — replacing credit card balances at 20%+ can justify a higher mortgage rate, provided the underlying spending problem is fixed. The risk is real: unsecured debt has become secured against your home.
- You need a large sum and hold a small mortgage — if the existing balance is modest, re-pricing it matters less and the simplicity of one loan can win.
- Otherwise, look at a second lien — a home equity loan or HELOC leaves the first mortgage untouched. The rate on the second is usually higher than a first mortgage rate, but it applies only to the amount borrowed — which is almost always cheaper than re-pricing everything when you hold a low first-mortgage rate.
What this assumes, and where it stops
Assumptions
- Closing costs are rolled into the new loan rather than paid in cash.
- Both loans are fixed-rate and fully amortising, and payments are principal and interest only.
- The existing loan would otherwise run to the end of its remaining term.
- No mortgage insurance is added, which would apply above 80% LTV.
Limitations
- Most lenders cap cash-out refinances at 80% LTV for a primary residence, and lower for investment property. That cap is not enforced here.
- Mortgage insurance, which applies above 80% LTV, is not included and would add to the cost.
- Tax deductibility of mortgage interest depends on how the cash is used — funds not used to improve the home generally do not qualify.
- The opportunity cost or benefit of what you do with the cash is not modelled.
Common questions
Is a cash-out refinance or a HELOC cheaper?
It depends almost entirely on your existing rate. If your current mortgage rate is well below today's rates, a HELOC or home equity loan is usually far cheaper, because it leaves the low first mortgage untouched and charges the higher rate only on what you actually borrow. A cash-out refinance re-prices your whole balance, so the effective cost of the cash can be double the headline rate or more.
How much cash can I take out?
Most lenders cap a cash-out refinance at 80% of the home's value for a primary residence, meaning you must keep at least 20% equity. VA loans can go higher, and investment properties are usually capped lower at around 70–75%. Closing costs are typically rolled into the loan, which counts toward that limit, so the cash you actually receive is less than the equity available on paper.
Is the interest tax deductible?
Only if the money is used to buy, build or substantially improve the home securing the loan, and only if you itemise. Cash taken out to consolidate debt, pay tuition or fund anything else generally does not qualify for the mortgage interest deduction, even though it is secured by the property. This catches people who assume all mortgage interest is deductible.
Sources
- What is a cash-out refinance? — US Consumer Financial Protection Bureau
- Publication 936, Home Mortgage Interest Deduction — US Internal Revenue Service
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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