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Homeowners in the United States may build substantial equity as they pay down their mortgages and property values change. That equity can become a valuable financial resource, particularly when a homeowner needs money for home improvements, debt repayment, education expenses, or another major financial goal.

One way to access that equity is through a cash-out refinance.

A cash-out refinance replaces your existing mortgage with a new, larger mortgage and gives you the difference in cash after paying off the old loan and accounting for applicable closing costs. Unlike a traditional refinance, which primarily changes the terms of your existing mortgage, a cash-out refinance allows you to borrow against the equity you have accumulated in your home.

However, receiving cash at closing does not mean you are receiving free money. You are taking on new debt secured by your property. Depending on your interest rate, repayment term, closing costs, and use of the funds, a cash-out refinance could improve your financial situation—or make it more expensive.

In this guide, you’ll learn how cash-out refinancing works, how to calculate your potential cash proceeds, when it may make financial sense, what risks to consider, and which alternatives may be worth comparing before you apply.

What Is a Cash-Out Refinance?

A cash-out refinance is a mortgage transaction in which you replace your current mortgage with a new loan for a larger amount than the existing mortgage balance.

The new mortgage pays off the old mortgage. After accounting for closing costs, prepaid expenses, and any other required payoffs, you receive the remaining amount in cash.

The new mortgage is generally secured by the same property, which means your home remains collateral for the debt.

How cash-out refinancing works

Suppose you own a home valued at $450,000 and have an outstanding mortgage balance of $200,000.

You apply for a new mortgage of $300,000.

The new mortgage pays off the existing $200,000 balance, leaving $100,000 before closing costs and other deductions.

If your total transaction costs and other required deductions equal $8,000, your estimated cash proceeds would be:

$300,000 − $200,000 − $8,000 = $92,000.

In this hypothetical example, you would receive approximately $92,000 in cash.

However, you would now owe $300,000 on the new mortgage rather than $200,000. Your monthly payment would depend on the new interest rate, loan term, and applicable mortgage costs.

The key point is that a cash-out refinance converts part of your home equity into borrowed cash while increasing or restructuring the debt secured by your home.

How Much Cash Can You Get From a Cash-Out Refinance?

The amount you can withdraw depends on several factors, including:

• Your home’s current appraised value.
• Your outstanding mortgage balance.
• The lender’s maximum permitted loan-to-value ratio.
• Your credit history and credit score.
• Your income and debt-to-income ratio.
• The property type and occupancy status.
• The mortgage program’s eligibility requirements.
• Closing costs and other required deductions.

Lenders do not necessarily allow you to borrow the full amount of your home equity. They typically impose loan-to-value limits and evaluate whether you can afford the new mortgage.

Understanding loan-to-value ratio

The loan-to-value ratio, commonly called LTV, compares the mortgage amount with the property’s appraised value.

The formula is:

LTV = Mortgage loan amount ÷ Appraised property value × 100

For example, suppose your home is worth $450,000 and the proposed new mortgage is $300,000.

Your LTV would be:

$300,000 ÷ $450,000 × 100 = 66.7%.

A lower LTV generally means that more equity remains in the property after the loan is issued.

However, the maximum permitted LTV depends on the lender, loan program, property type, occupancy status, and other eligibility requirements. There is no single cash-out refinance limit that applies to every borrower.

Example: Calculating potential cash proceeds

Consider the following hypothetical situation:

Item	Amount
Current home value	$450,000
Existing mortgage balance	$200,000
Proposed new mortgage	$315,000
Estimated closing costs	$8,000
Estimated cash proceeds	$107,000
New loan-to-value ratio	70%

The estimated cash proceeds are calculated as follows:

$315,000 − $200,000 − $8,000 = $107,000.

The homeowner would receive approximately $107,000, assuming the lender approves the new loan and there are no additional deductions.

This is only an illustration. Your actual cash proceeds may be lower because of appraisal results, lender restrictions, subordinate liens, prepaid items, or other transaction costs.

Does having substantial equity guarantee approval?

No.

Equity is an important part of the application, but lenders also evaluate your ability to repay the loan.

For example, a homeowner may have significant equity but insufficient qualifying income to support a larger mortgage payment.

A lender may also consider your credit history, existing debt obligations, employment or income documentation, property condition, and applicable program requirements.

Before assuming you can access a particular amount, request a preliminary estimate from a lender and confirm the requirements of the specific mortgage program.

Cash-Out Refinance vs. Traditional Mortgage Refinance

Both transactions replace an existing mortgage with a new one, but their primary purposes differ.

A traditional rate-and-term refinance generally focuses on changing the interest rate, loan term, or other mortgage terms without taking substantial equity out as cash.

A cash-out refinance is designed to provide access to part of your accumulated home equity.

Feature	Traditional refinance	Cash-out refinance
Primary purpose	Change mortgage terms	Change mortgage terms and access equity
Existing mortgage	Replaced	Replaced
Cash paid to borrower	Generally little or none	Potentially substantial
New loan balance	Often similar to or lower than the old balance, subject to costs	Generally larger than the existing balance when cash is withdrawn
Monthly payment	May rise or fall	May rise or fall
Closing costs	Usually apply	Usually apply
Home used as collateral	Yes	Yes
Risk of losing the home after serious default	Yes	Yes

A cash-out refinance is not automatically better simply because it provides cash. If your existing mortgage has a very low interest rate, replacing it with a higher-rate mortgage could increase your long-term borrowing costs.

For homeowners who want to keep their existing first mortgage, a home equity loan or home equity line of credit may be worth comparing.

When Does a Cash-Out Refinance Make Sense?

A cash-out refinance may make sense when the financial benefits justify the additional debt, transaction costs, and risk to your home.

The following situations deserve careful consideration.

1. Funding substantial home improvements

Home renovations are a common reason homeowners consider cash-out refinancing.

Examples include:

• Remodeling a kitchen or bathroom.
• Replacing an aging roof.
• Improving energy efficiency.
• Adding living space.
• Making necessary structural repairs.
• Improving accessibility for a household member.

Using home equity for improvements can be reasonable when the work is necessary, the costs are carefully budgeted, and the new mortgage remains affordable.

However, renovation spending does not guarantee that your home’s market value will increase by the amount you spend.

Before borrowing, obtain estimates from contractors and compare the expected project cost with the total cost of financing it.

Also consider whether the project qualifies as a substantial improvement for federal mortgage-interest deduction purposes. Tax treatment depends on how the borrowed funds are used and other applicable requirements.

2. Consolidating high-interest debt

Some homeowners use cash-out refinancing to pay off high-interest credit card balances or personal loans.

The attraction is straightforward: mortgage interest rates may be lower than the rates charged on unsecured debts, and a mortgage can spread repayment over a longer period.

For example, a homeowner with $30,000 in credit card debt at a high interest rate may be able to refinance and use part of the proceeds to pay off those balances.

But a lower interest rate does not automatically mean a lower total cost.

Mortgage repayment periods can extend for many years, and closing costs can offset some of the savings. More importantly, credit card debt is generally unsecured, while a cash-out refinance turns the borrowed amount into debt secured by your home.

If you consolidate credit cards but continue spending beyond your means, you could end up with both a larger mortgage and new credit card balances.

Debt consolidation should therefore be accompanied by a realistic spending plan and a strategy for avoiding new high-interest debt.

3. Paying for a major expense

A cash-out refinance may provide funds for a major expense, such as education or a significant family need.

However, the suitability of this approach depends on the purpose of the expense, the amount required, your existing mortgage terms, and the alternatives available.

For example, borrowing against your home to fund a short-term expense may be less attractive if the new mortgage creates decades of additional repayment obligations.

Compare the full repayment cost and risks with other financing options before deciding.

4. Replacing an expensive mortgage structure

A cash-out refinance can sometimes be combined with a change in mortgage structure.

For example, a borrower may want to replace an adjustable-rate mortgage with a fixed-rate mortgage while withdrawing equity.

This could make payments more predictable if the new loan has a fixed rate, but the overall financial benefit depends on the new rate, term, fees, and amount borrowed.

Do not assume that a fixed-rate mortgage will necessarily have a lower payment. A higher rate or larger principal balance can increase the monthly obligation.

5. Accessing equity when other financing is unsuitable

Some homeowners may not qualify for an unsecured personal loan with favorable terms, or they may need a larger amount than other products can provide.

A cash-out refinance could be an option if they meet mortgage underwriting requirements and can comfortably afford the new loan.

Nevertheless, easier access to a large sum should not be the only reason to proceed. Your home is an important asset, and the consequences of default can be severe.

When Should You Avoid a Cash-Out Refinance?

Cash-out refinancing can be expensive or unsuitable in several circumstances.

Your current mortgage has a much lower interest rate

Suppose you currently have a fixed-rate mortgage at 3.25%, but the new mortgage available to you has a rate of 6.50%.

Replacing the entire existing mortgage with a higher-rate loan could increase the interest charged on the balance you already owe, not just the additional cash you withdraw.

Even if you need funds, it may be worth comparing a home equity loan or HELOC that leaves the original first mortgage in place.

The comparison must include the second loan’s interest rate, payment, fees, and repayment structure.

You plan to sell the home soon

Closing costs can make refinancing less attractive if you expect to move in the near future.

You may not keep the new loan long enough to justify the transaction expenses, especially if the refinancing does not generate sufficient savings or provide a necessary financial benefit.

Consider how long you expect to remain in the property and calculate whether the benefits outweigh the costs during that period.

Your income is unstable

A cash-out refinance increases or restructures your secured debt.

If your income is unpredictable, your employment is uncertain, or you have limited emergency savings, taking on a larger mortgage may create financial pressure.

Consider whether you could continue making payments during a temporary loss of income or an unexpected increase in expenses.

You are using home equity to cover recurring budget shortfalls

If your monthly expenses consistently exceed your income, a cash-out refinance may only postpone the underlying problem.

Using home equity to pay ordinary living expenses can gradually reduce the financial cushion you have built in your property.

Before borrowing, identify the reason for the shortfall and consider whether reducing expenses, increasing income, or arranging a more sustainable repayment plan would address the problem more effectively.

You cannot comfortably afford the new payment

A lender’s approval does not necessarily mean that the loan is the right choice for your household.

Review the new mortgage payment alongside property taxes, homeowners insurance, maintenance costs, utilities, and other debts.

Make sure the payment fits your budget without requiring you to sacrifice essential expenses or eliminate all emergency savings.

Cash-Out Refinance vs. Home Equity Loan vs. HELOC

A cash-out refinance is only one way to access home equity.

Two common alternatives are a home equity loan and a home equity line of credit, or HELOC.

Each has a different structure, and the best choice depends on whether you need a lump sum, ongoing access to credit, or a way to preserve your current first mortgage.

Cash-out refinance

A cash-out refinance replaces your existing mortgage with a new mortgage.

You receive cash at closing after the existing loan and applicable costs are paid.

Potential advantages include combining the mortgage debt into one loan and possibly obtaining a different interest rate or repayment term.

Potential disadvantages include refinancing the entire existing mortgage, paying closing costs, and increasing the debt secured by your home.

Home equity loan

A home equity loan is generally a separate loan secured by your home, in addition to your existing mortgage.

You typically receive a lump sum and repay it according to the loan’s terms. Many home equity loans have fixed interest rates, although product structures vary.

A home equity loan may be attractive if you want a defined amount of money while keeping your existing first mortgage intact.

However, you will have an additional loan payment, and your home remains at risk if you fail to meet the repayment obligations.

Home equity line of credit

A HELOC is a revolving line of credit secured by your home.

You can generally borrow as needed up to the approved credit limit during the draw period, subject to the lender’s terms. You may pay interest only on the amount borrowed during some or all of that period, but the repayment structure varies.

Many HELOCs have variable interest rates, which can cause payments to change.

When the draw period ends, repayment requirements may increase, and you may need to repay principal and interest over a shorter period.

A HELOC may be useful when expenses occur gradually, such as during a renovation completed in stages. It may be less suitable if you need payment certainty and are uncomfortable with variable rates.

Comparison table

Feature	Cash-out refinance	Home equity loan	HELOC
Replaces existing first mortgage	Yes, generally	No	No
Provides a lump sum	Yes	Yes	Usually allows draws as needed
Access to funds over time	Generally no, after closing	Generally no	Yes, during the draw period
Interest rate	Fixed or adjustable, depending on loan	Often fixed	Often variable
Number of loan payments	Usually one mortgage payment	First mortgage plus second-loan payment	First mortgage plus HELOC payment
Closing costs	May be substantial	Vary by lender	Vary by lender
Can preserve a low-rate first mortgage	No	Yes	Yes
Home is collateral	Yes	Yes	Yes

Compare actual offers rather than assuming one product is always cheaper. Interest rates, fees, repayment terms, and the amount you need can substantially change the result.

How to Compare the True Cost of a Cash-Out Refinance

Before applying, estimate the total cost of the new mortgage rather than focusing only on the cash you receive at closing.

1. Compare interest rates

The interest rate affects how much you pay to borrow money.

If your current mortgage has a low rate and the new loan has a substantially higher rate, the cost of refinancing the entire balance may outweigh the benefit of obtaining additional cash.

Ask the lender for the proposed interest rate and annual percentage rate (APR). APR can help you compare certain borrowing costs, although you should also review the fees and loan terms individually.

2. Review closing costs

Cash-out refinancing can involve expenses such as:

• Lender origination charges.
• Appraisal fees.
• Credit report fees.
• Title services.
• Recording fees.
• Prepaid interest.
• Escrow funding.
• Discount points, if applicable.

Not every loan includes every fee, and the amount varies by lender and location.

Ask for a written Loan Estimate and compare the charges with competing offers.

If you roll closing costs into the new mortgage, you may reduce the cash you receive or increase the amount you owe. A loan advertised with no upfront closing costs may still involve costs that are reflected in the rate or other terms.

3. Compare repayment terms

A longer mortgage term can reduce the required monthly payment by spreading repayment over more months.

However, extending the repayment period may increase the total interest paid, particularly if you are restarting a long repayment schedule.

For example, a homeowner who has already paid ten years on a 30-year mortgage may be considering a new 30-year loan. The new payment could be lower than expected if the interest rate is favorable, but the borrower may also end up making mortgage payments for an additional ten years.

Compare the new loan’s full repayment schedule with the remaining payments on your existing mortgage.

4. Estimate the total cost of borrowing the additional cash

A useful comparison separates the cost of the existing mortgage balance from the cost of the additional funds.

Suppose you need $40,000 for a home renovation. Compare:

• A cash-out refinance that replaces your existing mortgage.
• A home equity loan for $40,000.
• A HELOC used to fund the project.
• A personal loan or other available financing.

For each option, estimate the monthly payment, total interest, fees, repayment period, and consequences of missed payments.

Do not compare a 30-year mortgage payment with a five-year personal loan payment without considering that the mortgage may accrue interest over a much longer period.

5. Consider your plans for the property

If you plan to sell the property, move to another state, or retire soon, those plans should influence your decision.

A refinancing transaction may take time to recover its costs, while a larger mortgage can affect the equity you retain when selling.

Estimate your likely home-sale proceeds after accounting for the outstanding mortgage and potential selling expenses.

Example: Does a Cash-Out Refinance Save Money?

Imagine a homeowner has the following financial situation:

• Current mortgage balance: $220,000.
• Current mortgage interest rate: 3.50%.
• Remaining term: 20 years.
• Desired cash withdrawal: $40,000.
• Estimated refinancing costs: $7,000.
• Proposed new mortgage interest rate: 6.25%.
• New mortgage term: 30 years.

The homeowner might need a new mortgage of approximately $267,000 to cover the existing balance, the desired cash withdrawal, and the assumed transaction costs.

The exact amount would depend on how the costs are paid and any other deductions.

At first glance, the homeowner receives the desired $40,000. However, the transaction replaces a relatively low-rate mortgage with a larger loan at a higher rate.

The new payment could be lower or higher than the current payment depending on the specific terms, but a lower payment would not necessarily mean lower total borrowing costs. The new mortgage would also extend the repayment period.

In this situation, a home equity loan or HELOC may be worth examining because it could allow the homeowner to retain the existing 3.50% first mortgage.

This example does not establish that a second loan would be cheaper. The homeowner would need to compare the second loan’s rate, fees, payment, and repayment term with the costs of refinancing the entire balance.

The broader lesson is that the rate on your existing mortgage matters just as much as the rate on the new loan.

How to Apply for a Cash-Out Refinance

The application process resembles that of a standard mortgage refinance, although cash-out transactions may have additional eligibility requirements.

Step 1: Estimate your home equity

Start with a reasonable estimate of your property’s current value.

Subtract the outstanding mortgage balance and any other liens secured by the property to understand how much equity may be available.

Remember that a lender’s appraisal may differ from an online estimate or your own valuation.

Step 2: Check your credit and finances

Review your credit reports, income, existing debts, and savings.

Lenders generally evaluate your creditworthiness and ability to make the new payments. Improving your credit profile or reducing other debts may help your application, although approval and pricing depend on the lender’s criteria.

Avoid taking on unnecessary new debt immediately before applying.

Step 3: Compare lenders and loan programs

Request quotes from more than one lender.

Compare the proposed interest rate, APR, closing costs, loan term, cash proceeds, and any restrictions on the use of funds.

Ask whether the lender is offering a conventional conforming mortgage, a government-backed product where available, or another loan program. Eligibility and cash-out rules can differ substantially.

Step 4: Prepare the required documents

Depending on your circumstances, the lender may request:

• Recent pay stubs or other income documentation.
• Tax returns or business records.
• Bank and investment account statements.
• Information about existing debts.
• Mortgage statements.
• Homeowners insurance information.
• Property tax records.
• Identification and ownership documentation.

Self-employed borrowers may need additional documentation to verify income.

Step 5: Complete the appraisal and underwriting process

The lender will assess the property’s value and review your application.

Underwriting may involve verifying income, assets, debts, ownership history, and other eligibility criteria.

The amount you can borrow may change if the appraisal or underwriting results differ from your initial expectations.

Step 6: Review the Loan Estimate and Closing Disclosure

Review the Loan Estimate carefully when provided. It outlines important information about the proposed mortgage, including estimated costs and payments.

Before closing, review the Closing Disclosure and compare its terms with the earlier estimate.

Confirm the interest rate, loan amount, monthly payment, closing costs, cash proceeds, and any prepayment provisions.

Ask the lender to explain discrepancies or unexpected charges before signing.

Step 7: Close the loan and receive the proceeds

At closing, the new mortgage pays off the existing mortgage and any other obligations included in the transaction.

After the required payoffs and deductions, the remaining funds are disbursed according to the closing instructions.

Make sure you understand when the first new payment is due and how your mortgage servicing will work.

Cash-Out Refinance Requirements in the United States

Requirements vary by lender and mortgage program. Common considerations include the following.

Credit score

Lenders evaluate credit history and creditworthiness when assessing an application.

A stronger credit profile may improve the terms available to you, but minimum score requirements depend on the loan program, underwriting method, lender overlays, and other factors.

Do not assume that a single credit score guarantees approval.

Equity and loan-to-value limits

A lender generally limits how much you can borrow relative to the property’s value.

The maximum LTV varies according to property type, occupancy, loan program, and other underwriting requirements.

Investment properties and second homes may have different limits from primary residences.

Income and debt-to-income ratio

The debt-to-income ratio, or DTI, compares qualifying monthly debt obligations with qualifying gross monthly income.

Lenders use DTI as one measure of repayment capacity. The maximum permitted ratio depends on the loan program and the overall application.

A homeowner with substantial equity may still be declined if the lender determines that the proposed mortgage is not affordable under its underwriting rules.

Ownership history and existing mortgage requirements

Some conventional cash-out refinance programs impose minimum ownership periods or requirements related to the age of the existing mortgage.

For example, Fannie Mae’s published conventional cash-out refinance guidance generally includes a 12-month requirement for an existing first mortgage being paid off and a six-month ownership requirement, subject to specified exceptions and program details.

These requirements do not apply identically to every mortgage product. Ask your lender which rules govern your transaction.

Property appraisal

The lender generally needs to establish the property’s value to determine the applicable LTV ratio.

If the appraisal is lower than expected, the amount you can withdraw may decrease, or the transaction may no longer meet the program’s requirements.

Are Cash-Out Refinance Proceeds Taxable?

In the United States, loan proceeds are generally not treated as taxable income because they represent borrowed money that must be repaid.

However, the tax treatment of interest on the new mortgage is a separate issue.

Do not assume that mortgage interest on a cash-out refinance is automatically tax-deductible.

The IRS generally limits the deductibility of home mortgage interest according to how the borrowed funds are used, along with other requirements and limitations.

For example, interest attributable to funds used to buy, build, or substantially improve a qualified home may receive different treatment from interest attributable to funds used to pay personal expenses or credit card debt.

Whether any interest is deductible depends on the applicable tax rules, the loan’s use, the amount of qualifying debt, and your individual circumstances.

If you plan to use cash-out proceeds for renovations, investments, debt repayment, or another purpose, maintain records showing how the funds were spent.

Consult IRS Publication 936, IRS Publication 530, or a qualified tax professional for guidance relevant to your situation.

Alternatives to a Cash-Out Refinance

If refinancing your entire mortgage appears expensive, consider whether another option better matches your needs.

Home equity loan

A home equity loan may be worth considering if you need a defined lump sum and want to retain your current first mortgage.

Compare the rate, fees, repayment period, and combined monthly payments.

HELOC

A HELOC may suit a project with expenses spread over several months or a need for flexible access to funds.

Check the draw period, variable-rate terms, repayment structure, annual fees, and potential payment increases.

Personal loan

A personal loan is generally unsecured, meaning it does not directly use your home as collateral.

It may have a higher interest rate than a mortgage-backed product, but it can involve a shorter repayment period and different fees.

Compare the total repayment cost rather than the interest rate alone.

Balance transfer or debt repayment plan

If your goal is to pay off credit card debt, a balance transfer or structured repayment plan may be worth exploring.

A promotional balance transfer can reduce interest temporarily, but fees, promotional deadlines, and post-promotional rates matter.

A nonprofit credit counseling organization may also help you evaluate a repayment strategy.

Saving for the expense

If the expense is not urgent, saving gradually may avoid taking on additional secured debt.

This may not be practical for major repairs or emergencies, but it is worth considering for discretionary purchases and projects that can be delayed.

Frequently Asked Questions About Cash-Out Refinancing

How much equity do I need for a cash-out refinance?

There is no single equity requirement that applies to every cash-out refinance. Lenders typically impose maximum LTV limits that vary by mortgage program, property type, occupancy, and borrower qualifications.

Your available cash also depends on the outstanding mortgage balance, other liens, and closing costs.

Can I use cash-out refinance money for any purpose?

Conventional cash-out refinance proceeds can generally be used for a variety of purposes, subject to the applicable loan program and lender requirements.

Possible uses include home improvements, debt repayment, and other expenses. However, the tax treatment of interest may depend on how the funds are used.

Does a cash-out refinance increase my monthly payment?

It can, but the result depends on the new loan amount, interest rate, repayment term, and other costs.

A longer repayment term may reduce the required monthly payment even when the new mortgage balance is larger. That does not necessarily mean the transaction costs less over its full life.

Can I get a cash-out refinance with bad credit?

Approval may be more difficult if you have a weak credit history, although eligibility depends on the lender and loan program.

You may face less favorable pricing or additional requirements. Before applying, compare lenders and understand how the proposed loan would affect your budget.

Is a cash-out refinance better than a HELOC?

Neither option is always better.

A cash-out refinance replaces your existing mortgage and may make sense if the new mortgage terms are attractive and you need a substantial lump sum.

A HELOC leaves your existing first mortgage in place and can provide flexible access to funds, but it may carry a variable interest rate and changing repayment obligations.

Compare the total costs and risks of both options.

Does a cash-out refinance reset my mortgage term?

A cash-out refinance creates a new mortgage with a new repayment schedule. If you choose a new 30-year term, your repayment period may extend beyond the time remaining on your original loan.

You may be able to choose a shorter term, subject to lender availability and qualification.

Can I sell my home after a cash-out refinance?

Generally, you can sell your home after refinancing, subject to the terms of your mortgage and applicable requirements.

When you sell, the outstanding mortgage must generally be paid off from the sale proceeds. A larger mortgage can reduce the equity you retain after paying off the loan and transaction expenses.

Are closing costs included in the new mortgage?

Depending on the transaction and lender, eligible closing costs may be paid at closing or incorporated into the new loan amount.

Financing costs reduces the cash you receive or increases the debt you owe. Review the Loan Estimate and Closing Disclosure to understand how the costs are handled.

Final Thoughts: Is a Cash-Out Refinance Worth It?

A cash-out refinance can be a useful way to access home equity, but it should be treated as a significant borrowing decision rather than a simple source of cash.

It may make sense when you have a clear purpose for the funds, can comfortably afford the new mortgage, and have compared the full cost with alternative financing options.

It may be less attractive when your existing mortgage has a much lower interest rate, you expect to sell soon, your income is uncertain, or you are using home equity to cover ongoing budget problems.

Before moving forward, calculate the available equity, compare multiple loan offers, examine closing costs, and estimate your total repayment obligations. Pay particular attention to the interest rate on your current mortgage, because refinancing the entire balance can be more expensive than borrowing a smaller amount separately.

Finally, remember that your home secures the debt. Failure to meet the mortgage obligations can put the property at risk.

The best decision is not necessarily the one that gives you the most cash at closing. It is the one that meets your financial needs while keeping your long-term housing costs and financial security manageable.

Sources

1. Fannie Mae — Cash-Out Refinance Transactions
   https://selling-guide.fanniemae.com/sel/b2-1.3-03/cash-out-refinance-transactions
2. Freddie Mac — Cash-Out Refinance
   https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/cash-out-refinance
3. Consumer Financial Protection Bureau — Explore Mortgage Options
   https://www.consumerfinance.gov/owning-a-home/explore/
4. Consumer Financial Protection Bureau — Loan Estimate Explainer
   https://www.consumerfinance.gov/owning-a-home/loan-estimate/
5. Internal Revenue Service — Publication 936: Home Mortgage Interest Deduction
   https://www.irs.gov/publications/p936
6. Internal Revenue Service — Publication 530: Tax Information for Homeowners
   https://www.irs.gov/publications/p530
7. Consumer Financial Protection Bureau — What Is a Home Equity Line of Credit (HELOC)?
   https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-247/