Free calculator
Cash-out refinance calculator
How much equity can you pull out, and what does the bigger loan cost each month?
The cash-out formula
Cash out = (property value × loan-to-value) − current balance − closing costs
A worked example
A rental is worth $300,000 and has $150,000 left on its loan. A lender offering 75% loan-to-value will lend $225,000. That pays off the old $150,000 loan and $4,000 of closing costs, and leaves $71,000 for you. You keep $75,000 of equity in the property.
What it costs
The cash is borrowed, not earned. Your new payment is based on $225,000 instead of $150,000, and possibly at a higher rate than the loan you are replacing. Before you refinance, check two things: that the property still cash flows with the new payment, and that what you plan to do with the money earns more than the new loan costs.
Common uses
- The down payment on the next property
- Finishing a BRRRR, where the refinance returns the cash used to buy and renovate
- Paying off higher-interest debt such as a hard-money loan
- Renovations that raise rent or value
Questions
What is the maximum loan-to-value on a cash-out refinance?
For investment properties, lenders commonly cap cash-out refinances at 70% to 75% of appraised value. Owner-occupied homes usually allow up to 80%. Limits vary by lender and program.
How soon after buying can I do a cash-out refinance?
Many lenders require a seasoning period, often six to twelve months of ownership, before they will lend against a new appraised value. Some loan programs are more flexible.
Is the cash from a refinance taxable?
Loan proceeds are generally not treated as income, because they have to be repaid. The tax treatment of the interest depends on how the money is used. Confirm your situation with a tax professional.
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