Get an estimate of how much cash you may be able to borrow from your home equity.

A cash out refinance replaces your current mortgage for more than you currently owe, and you get the difference in cash to use as you need. You can use the equity in your home to make home improvements, consolidate high-interest debts, or pay for other large expenses.

Our calculator may help you decide if a cash out refinance is a good idea for your financial future.

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Question answer section


What is a cash out refinance?


A cash out refinance is when you take a portion of your home's equity out as cash while refinancing your current mortgage. A conventional refinance loan will only be for the amount that you owe on your existing mortgage, but a cash out refinance loan will increase the amount of the loan. This allows you to both replace your existing mortgage and take a lump-sum payment in cash for the additional amount of the loan.


How much cash can you receive through a 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. This may vary between lenders, but Discover Home Loans allows for loans up to 90% of CLTV. Use this maximum CLTV percentage and multiply that by your current home’s value to calculate a maximum potential loan amount. When you subtract your existing mortgage balance from that loan amount, you will have an estimate of how much cash you might be able to take out with a cash out refinance.


What’s an example of a cash out refinance estimate?


Let’s use the following example to walk through calculations for a cash out refinance:

A homeowner owes $200,000 on a first-lien purchase mortgage loan and $45,000 on a second-lien home equity loan.

The current home value is $400,000.

The combined loan amounts are $200,000 + $45,000 = $245,000.

The current CLTV is $245,000 / $400,000 = 61.25%.

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

Since $245,000 is owed on existing loans, the maximum cash out value possible with a 90% CLTV ratio is $360,000 - $245,000 = $115,000.

While the homeowner does not have to take out the full amount available, finding these values for your home can help to understand the limits of your loan application before applying. Please note that Discover offers loan total loan amounts between $35,000 and $300,000 on first and second liens.


How does a cash out refinance compare with a conventional refinance loan?


A conventional refinance loan will replace the outstanding balance on your current mortgage with a new loan and potentially a new rate and term. A cash out refinance does the same thing, but it also allows you to take out an additional amount from your home equity that you can receive as a lump-sum payment. The additional amount will be included in your new loan balance. This will give you a single monthly payment for refinancing and borrowing cash from your home equity.


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. You might consider using this loan to consolidate high-interest debt, make home repairs or renovations, or support educational expenses. Compare the loan options you may qualify for to decide what will help you achieve a brighter financial future.

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 may be able to borrow at a low, fixed 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.

Visit our debt Consolidation Calculator to find out how you might be able to reduce your monthly payments by consolidating existing loans.

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