Cash-out refinance: pull equity, but only if the math wins.
A cash-out refinance replaces your existing first mortgage with a larger one and hands you the difference in cash. It is powerful for renovation, debt consolidation, or a major purchase. It is dangerous if you carry a low first-lien rate or treat the cash as found money. We show you when it works and when a HELOC wins instead.
Cash-out snapshot
Updated todayThree scenarios where cash-out wins.
Cash-out is the right tool when the new loan rate is similar to your old one and the cash funds a productive use.
Scenario 1: Pay off high-rate debt
You owe $40,000 across credit cards at 22% APR. Monthly minimums are $1,200. A cash-out at 7.10% replaces that with about $270 in monthly interest on the additional $40,000 of mortgage. The savings: roughly $11,000 in year-one interest. The risk: if you refill the cards, you doubled your debt. The only people who should run this play are those who close the cards or freeze them.
Scenario 2: Renovation that adds value
A $60,000 kitchen remodel that boosts home value by $80,000 funded at 7.10% mortgage rates beats funding at 9% personal loan rates or 22% credit cards. The bonus: per the 2017 Tax Cuts and Jobs Act, the interest is deductible if the cash funds substantial improvements to the home. Get a written appraisal estimate before the project, not after.
Scenario 3: Down payment on second property
Pulling 20% to 25% equity to fund a down payment on an investment property or vacation home is one of the most common cash-out uses among long-term homeowners. The math works when the new property generates rental income that covers more than its cost of capital. Run the numbers conservatively and assume 5% to 8% vacancy and maintenance.
When cash-out loses
If your existing first-lien rate is below 5.5%, you almost always lose money on a cash-out. Replacing a 4.0% first mortgage with a 7.10% cash-out adds tens of thousands in interest over the life of the loan, even after the savings on the cashed-out amount. A HELOC at 8.5% is usually cheaper because it leaves the cheap first mortgage untouched.
The decision matrix.
Cash-out: fixed rate
Cash-out is a brand-new fixed-rate mortgage. You know the payment for 30 years. HELOCs are variable and can rise sharply if the Fed hikes.
HELOC: keep your old rate
A HELOC is a second lien. Your existing first mortgage stays at the old rate, which is huge if you locked in 3% to 5% during 2020-2022.
Closing cost difference
Cash-out closing costs run 2% to 3% of the loan. HELOC closing costs are usually $0 to $500. Small loans favor HELOC purely on closing cost economics.
Five cash-out lenders we recommend.
Ranked on a $400K cash-out refinance scenario at 75% LTV with a 760 FICO and W-2 income.
loanDepot
Highest LTVloanDepot is among the few lenders pushing to 85% LTV on cash-out refinances for strong borrowers. The rate premium at 80%+ runs about 0.25 points above conforming.
Best for: Owners pulling maximum equity for a down payment on a second property.
Better.com
Lowest closing costBetter's flat $1,995 lender fee strips out origination charges. On a $300,000 cash-out the savings versus a 1% origination is $1,000+. Limited to 80% LTV.
Best for: W-2 borrowers who want a fast online cash-out close at a flat fee.
Rocket Mortgage
Best for self-employedRocket underwrites bank statement income on cash-out refinances, which most online lenders refuse. Useful for owners with strong cash flow but light tax-return income.
Best for: Self-employed borrowers who need bank statement programs.
Chase Home Lending
Best relationship rateChase clients with $250K+ in deposits or investments earn up to 0.50 points off the cash-out rate, often the lowest effective APR for high-balance customers.
Best for: Chase Private Client and Premier customers who get rate discounts.
PNC Bank
Best HELOC alternativePNC's CHELOC product can convert HELOC balances to fixed segments, which provides a hybrid alternative to a full cash-out refinance. Useful when the first-lien rate is below 5%.
Best for: Borrowers comparing cash-out against a fixed-rate HELOC stack.
Run the math, then keep going.
Common questions about cash-out refinance.
How much can you cash out?
Most lenders cap cash-out refinances at 80% loan-to-value (LTV). On a home worth $600,000 with a $200,000 mortgage, the maximum new loan is $480,000, which means $280,000 in cash. A few lenders go to 85% on conventional. VA cash-out can go to 100% LTV for qualified veterans.
Is cash-out refinance interest tax-deductible?
Only when the cash is used to buy, build, or substantially improve the home that secures the loan, per the 2017 Tax Cuts and Jobs Act. Cash-out used to pay off credit card debt, fund education, or buy a car is not deductible. Consult a tax professional for your situation.
Cash-out refi vs HELOC: which wins?
If your current first-lien mortgage rate is below 5.5%, the HELOC almost always wins because you keep the cheap first mortgage. If your first-lien rate is above 7%, the cash-out can lower the entire loan rate plus extract equity. Run both scenarios. Our cash-out vs HELOC math is a few sections above.
How long does a cash-out refinance take?
Typical close is 30 to 45 days. Online lenders like Better and Rocket can close in 21 days for clean W-2 files. Cash-out adds an appraisal step that can extend the timeline. The CFPB requires a three-day rescission period after closing for primary residences.
Can you do a cash-out refinance on an investment property?
Yes, but at lower LTV (typically 70% to 75%) and a higher rate (about 0.50 to 0.75 points above primary). Reserves of 6 to 12 months of mortgage payments are usually required. Several major lenders pause investment property cash-out from time to time, so check current availability.
What credit score do you need for cash-out?
Conventional cash-out generally requires 620 minimum, with best pricing at 740+. FHA cash-out allows scores as low as 580 but caps LTV at 80%. VA cash-out has no minimum score per the VA, but most lenders set 620 as a floor. Higher LTV requires higher score.
See if cash-out beats a HELOC for you.
Plug in your old rate, new rate, and cash needed.