Cash-Out Refinance Calculator Formula

Understand the math behind the cash-out refinance calculator. Each variable explained with a worked example.

Use the Cash-Out Refinance Calculator

Formulas Used

Net Cash Received

net_cash_received = cash_out_amount

New Monthly Payment

new_monthly_payment = new_payment

Current Monthly Payment

current_monthly_payment = current_payment

Monthly Payment Change

payment_change = new_payment - current_payment

New Total Loan Amount

new_loan_total = new_loan_amount

New LTV Ratio

new_ltv_pct = new_ltv

Variables

VariableDescriptionDefault
home_valueCurrent Home Value(USD)500000
current_balanceCurrent Mortgage Balance(USD)300000
current_rateCurrent Mortgage Rate(%)6.5
current_remaining_yearsRemaining Years on Current Loan(years)25
cash_out_amountCash-Out Amount(USD)50000
new_rateNew Loan Rate(%)7
new_term_yearsNew Loan Term(years)30
closing_costsRefinance Closing Costs(USD)6000
new_loan_amountDerived value= current_balance + cash_out_amount + closing_costscalculated
new_ltvDerived value= new_loan_amount / home_value * 100calculated
r_currentDerived value= current_rate / 100 / 12calculated
n_currentDerived value= current_remaining_years * 12calculated
current_paymentDerived value= r_current > 0 ? current_balance * r_current * pow(1 + r_current, n_current) / (pow(1 + r_current, n_current) - 1) : current_balance / n_currentcalculated
r_newDerived value= new_rate / 100 / 12calculated
n_newDerived value= new_term_years * 12calculated
new_paymentDerived value= r_new > 0 ? new_loan_amount * r_new * pow(1 + r_new, n_new) / (pow(1 + r_new, n_new) - 1) : new_loan_amount / n_newcalculated

How It Works

Cash-Out Refinance Overview

A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between the new loan and your old balance is paid to you as cash.

How It Works

1. New Loan Amount = Current Balance + Cash-Out + Closing Costs 2. You receive the cash-out amount at closing 3. Your payment is recalculated on the new, larger balance

When It Makes Sense

  • Consolidating high-interest debt
  • Funding home improvements that increase value
  • Investing in additional property
  • When the new rate is similar to or lower than your current rate

    • Risks

  • Increases your total debt and LTV
  • Resets your amortization clock
  • Closing costs reduce the effective cash received

    • Worked Example

    A $500,000 home with $300,000 balance at 6.5% (25 years remaining). Cash out $50,000 with a new 30-year loan at 7% with $6,000 closing costs.

    home_value = 500000current_balance = 300000current_rate = 6.5current_remaining_years = 25cash_out_amount = 50000new_rate = 7new_term_years = 30closing_costs = 6000
    1. 01New loan amount: $300,000 + $50,000 + $6,000 = $356,000
    2. 02New LTV: $356,000 / $500,000 = 71.2%
    3. 03Current payment: $300,000 over 25 years at 6.5% = $2,028.28/month
    4. 04New payment: $356,000 over 30 years at 7% = $2,368.44/month
    5. 05Payment increase: $2,368.44 - $2,028.28 = $340.16/month
    6. 06You receive $50,000 cash at closing

    Frequently Asked Questions

    How much cash can I take out in a refinance?

    Most lenders allow a maximum 80% LTV for a cash-out refinance. On a $500,000 home, that means a maximum loan of $400,000. After paying off your existing balance and closing costs, the rest is your cash-out.

    Is a cash-out refinance better than a HELOC?

    A cash-out refi gives a fixed rate on the entire amount but resets your mortgage term. A HELOC has a variable rate but keeps your existing mortgage intact. Cash-out refi is better if rates are favorable; HELOC is better for smaller, short-term needs.

    Are there tax implications for a cash-out refinance?

    The cash-out proceeds are not taxable income. However, mortgage interest is only deductible on the portion used to buy, build, or substantially improve your home. Interest on cash used for other purposes is generally not deductible.

    Ready to run the numbers?

    Open Cash-Out Refinance Calculator