Learn how much cash you may be able to get out of your home.

You can use the equity in your home to consolidate other debt or to fund other expenses. A cash-out refinance replaces your current mortgage for more than you currently owe, but you get the difference in cash to use as you need. This calculator may help you decide if it's something worth considering, and give you a possible idea of a mortgage rate you might have after refinancing.

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Question answer section


What is cash-out refinance?


A cash out refinance is when you take a portion of your home's equity out as cash when refinancing your current mortgage. While a traditional refinanced loan will only be for the amount that you owe on your existing mortgage, a cash-out refinance loan will increase the amount of the loan, allowing you to both pay off your existing mortgage and take a lump-sum payment in cash for the additional amount of the loan. When mortgage rates are low, a cash out refinance may be advantageous over other types of credit like credit card, personal loans, or HELOCs that have a variable rate.

Discover's cash out refinance loan has a low, fixed rates that never change for the life of the loan, as well as has no cash due at closing.

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How much cash can you receive through cash-out refinance?


Typically, lenders will use your Combined Loan-to-Value (CLTV) ratio to understand your ability to take on new debt. To generate your CLTV on your own, follow these steps:

  • Add up the balances on all your existing home loans such as first mortgages, second mortgages or home equity lines of credit. This is your combined loan value.
  • Find the estimated value for your home. You can use an online tool, compare the sale cost of similar homes in your neighborhood, or pay for an official estimate.
  • Divide your combined loan amount by your estimated home value to calculate your current CLTV.

Once you know your current CLTV, you need to find out the maximum CLTV allowed by your cash-out refinance lender. Many lenders will cap any lending at 80% of your CLTV, but Discover Home Loans allows for loans up to 90% of CLTV. Use your lender’s maximum CLTV percentage and multiply that by your current home’s value to calculate maximum loan amount. When you subtract your existing mortgage balance from that maximum loan amount, you will see exactly how much cash can be obtained through cash-out refinance.


Can you provide an example of cash-out refinance calculations?


Let’s use the following example to walk through calculations for cash-out refinance (you can substitute your home’s values in the calculations below or use our Refinance Calculator):

A homeowner owes $100,000 on a first-lien mortgage loan and $45,000 on a second-lien home equity loan.

The current home value is $400,000.

The combined loan amount is $100,000 + $45,000 = $145,000.

The current CLTV is $145,000 / $400,000 = 36%.

With Discover you can borrow up to 90% CLTV 0.90 x $400,000 = $360,000 could be taken out against the current value of the home.

Since you owe $145,000 on your existing loans, the maximum cash-out value you can get is $360,000 - $145,000 = $215,000. While the homeowner does not have to take out the full amount available, finding these values for your home can help you understand the limits of your loan application before you apply.


How does a cash-out refinance compare with a traditional refinance loan?


A traditional refinance loan will fully repay the outstanding balance on your current mortgage with a new loan at typically better rates or terms. A cash-out refinance does the same thing, but also allows you to take out an additional amount that you can receive as a lump-sum payment. The additional amount will be included in your new loan balance and can be used for a variety of different purposes like debt consolidation, home improvement or making a large purchase.


How can you use a cash-out refinance?


There are no restrictions on how to you use the lump sum payment from your cash-out refinance loan. Borrowers have successfully used this loan to consolidate debt, make repairs or renovations to their home, or support educational expenses. Evaluate your loan options and make a decision based on your financial needs.

You may be able to access about $150,550 if you cashed out today.*

* What does this possibly mean for me?

The above is an estimated amount of cash you can take out based on the equity you've built in your home. This amount is based on your existing loan amount(s) and the estimated current value of your home and assumes that you could borrow up to 75% of the value of your home. There are benefits and risks of doing a cash-out refinance. You can often borrow at an attractive rate to finance home improvements, education, or other expenses for less than you'd pay with a different type of loan. Keep in mind, though, that whatever you borrow eventually has to be paid back. It's important to consider upfront closing costs on your new loan, and the time it will take you to recoup those costs. If your refinance is at a lower rate than the previous loan, you may save money if you continue making the same or higher payments. If you lower your payments too, however, you may pay higher total interest even though your rate is lower, because the debt is extended over a longer period.

Try the Debt Consolidation Calculator to find out how much you could reduce your payments by consolidating existing loans.

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