Keep things as they are
- Mortgage (principal and interest)
- $4,600/mo
- Four other debts ($200,000 owed)
- $4,150/mo
- Bills to track
- Five
$8,750/mo
Total monthly payments
For homeowners with equity to put to work
Cash-Out Refinance: Put Your Equity to Work
Pay off high-interest debt, add on to your home or buy your next property with one new mortgage.
- Up to 80%
- Of your home’s value
- Up to 90%
- For most VA loans
- One payment
- Instead of many
- Primary, 2nd, rental
- Property types
Why this loan exists
The equity you’ve built is money you can use
Every payment you make and every year your home gains value builds equity, the gap between what your home is worth and what you owe on it. For many of my clients it’s their largest asset, and it sits there doing nothing while credit card balances grow at 20% or more.
Americans now carry a record $1.26 trillion in credit card debt, according to the New York Fed. Per adult and after inflation, balances are below their highs of the 2000s. What has changed is the price of carrying them: card rates now average about 22%, according to the Federal Reserve. The same balance costs far more each month than it used to, and that is where your home equity can help.
A cash-out refinance turns some of that equity into cash. Your new loan pays off the old one, pays any debts you choose right at closing, and sends the rest to you. You end up with one mortgage and one payment, usually at a far lower rate than credit cards, car loans or medical payment plans.
It isn’t always the right move. If your current rate is well below today’s rates, a HELOC (home equity line of credit, a second loan that leaves your first mortgage alone) usually wins. A cash-out refinance shines when your current rate is close to today’s or higher. It also wins when your debts cost far more than your mortgage, or when you want one fixed payment. I run both before you choose.
The limits come from the agencies that back most mortgages. Freddie Mac, Fannie Mae and FHA allow cash out up to 80% of value on a home you live in. VA cash-out loans go higher for eligible veterans.
Total revolving credit (mostly credit cards) Per adult, in today’s dollars
Debt is January of each year (2026 is August, the latest month), from Federal Reserve G.19 via FRED. Adults 18 and over from the Census Bureau via NCES (1980 to 2020) and Census Bureau 2025 estimates. Per-adult amounts adjusted to September 2026 dollars with the Consumer Price Index.
Side by side
Same household, before and after
Take a family with a $1.3 million home. They owe $700,000 and pay $4,600 a month in principal and interest (the loan payment itself, before taxes and insurance). They also carry credit cards, student loans, a car loan and medical bills. Here is what rolling those debts into one new 30-year loan does, at a 6.875% example rate with $15,000 in closing costs.
Cash-out refinance
- New loan (balance + debts + costs)
- $915,000
- Share of home value
- 70%
- Other debts
- Paid off at closing
$6,011/mo
Total monthly payments
About $2,739 a month less, and four debts gone. The closing costs are earned back in about six months.
Use the calculator below to try today’s rate, your own debts and a shorter term.
Today: five payments
- Credit cards ($45,000) $1,350
- Car loan ($70,000) $1,250
- Medical bills ($25,000) $900
- Student loans ($60,000) $650
- Mortgage $4,600
$8,750 /mo
After a cash-out refinance: one payment
- New mortgage ($915,000) $6,011
$6,011 /mo
$2,739 a month back in their budget
Bars are drawn to scale. Payments are principal and interest at a 6.875% example rate.
Cash-out or HELOC
Refinance the whole loan, or add a second one?
Both turn equity into cash. The big question is what happens to the mortgage you already have.
Cash-out refinance
- Your current mortgage
- Replaced by one new loan
- Rate
- Usually fixed for the life of the loan
- How much
- Up to 80% of value (90% for VA on most programs)
- Payments
- One
Choose this if your current rate is close to today’s or higher, or you want one fixed payment for everything.
HELOC
- Your current mortgage
- Stays exactly as it is
- Rate
- Usually variable, on what you draw
- How much
- Up to 89% of value, counting your first mortgage
- Payments
- Two
Choose this if your first mortgage rate is well below today’s and you want to keep it.
Bottom line
See the full picture on my HELOC page, or read my Home Equity Playbook, which compares all three with real dollars. Self-employed? A cash-out refinance can also qualify on bank statements instead of tax returns.
Real math
Three homeowners, three reasons to take cash out
Here is how a cash-out refinance plays out for three common goals. Payments are principal and interest at a 6.875% example rate on a 30-year loan. Tap “Run this in the calculator” to load any of them and try your own changes, like a shorter term.
Scenario 1 · A baby on the way
Lake Norman family adding a nursery
They bought their $1.1M home in 2024 at a rate higher than today’s and owe $550,000. With a baby coming, they want $150,000 for a nursery addition and a refreshed kitchen.
The numbers
- Home value
- $1,100,000
- Owed today
- $550,000
- Cash for the addition
- $150,000
- New loan with $12,000 in costs
- $712,000 (65% of value)
- Payment before → after
- $3,820 → $4,677/mo
The result
$150,000
Cash for the nursery and kitchen
Because their old rate was higher than today’s, refinancing the whole loan doesn’t raise the rate on what they already owed. The extra $857 a month pays for an addition that also adds value to the home.
Watch for: Building costs often run over. I size the cash with a cushion, because adding more after closing means another loan.
Scenario 2 · The next property
Charlotte homeowner buying a rental
Her home is worth $950,000 and she owes $560,000. She wants $160,000 for a 25% down payment on a $640,000 rental near uptown.
The numbers
- Home value
- $950,000
- Owed today
- $560,000
- Cash for the down payment
- $160,000
- New loan with $11,000 in costs
- $731,000 (77% of value)
- Payment before → after
- $4,020 → $4,802/mo
The result
$160,000
Down payment for the rental
Her home pays for the down payment, and the rental’s own loan can qualify on its rent with a DSCR loan (debt service coverage ratio: the rent has to cover the payment). Her payment rises $782 a month while she adds a second property that pays its own way.
Watch for: At 77% of value she is close to the 80% limit. If the appraisal (the lender’s independent estimate of value) comes in low, the cash shrinks, so I order it early.
Scenario 3 · A paid-off home
Business owner with no mortgage at all
He paid off his $1.2M home in Charlotte years ago. Now he wants $300,000 to open a second location of his landscaping company without selling investments.
The numbers
- Home value
- $1,200,000
- Owed today
- $0
- Cash for the business
- $300,000
- New loan with $9,000 in costs
- $309,000 (26% of value)
- Payment before → after
- $0 → $2,030/mo
The result
$300,000
Cash to grow the business
A paid-off home can be refinanced like any other. He could have borrowed up to $960,000, but he took only what the new location needs.
Watch for: He qualifies on the income he earns today. The new location’s income won’t count until it has a track record.
Get my options
Thinking about cash out? Tell me what it’s for.
Three quick taps and an optional note. I read every one myself and reply, usually the same day.
What are you looking to do?
How do you earn most of your income?
When would you like to buy or close?
Optional. A sentence or two about your situation helps me come to our call prepared.
Where should I reach you?
Your answers are already filled in below, so I’ll know your situation before we talk.
Rather just talk?
Run your numbers
Two calculators: how much cash, and what it saves
Start with how much cash your home can give you. Then list your debts in the second calculator to see your payments before and after. Slide the term from 30 years down to 10 to see how a shorter loan changes the payment.
How much cash can I take out?
Cash you could take out
$0
- Most you can borrow
- $0
- Minus what you owe
- $0
- Minus closing costs
- $0
- Loan-to-value today
- 0%
Loan-to-value is what you owe divided by what the home is worth. Limits shown are typical across the programs I can access. VA goes up to 90% on most programs and 100% on some. Non-QM (non-traditional) programs go up to 75% on loans up to $2.5M with 720+ credit.
Debt consolidation calculator
Change in your monthly payments
$0
- Paying now (mortgage + debts)
- $0
- New mortgage payment
- $0
- Mortgage payment change
- $0
- New loan amount
- $0
- Loan-to-value
- 0%
- Debts paid off
- $0
- Closing costs earned back in
- —
What people use it for
Twelve ways homeowners put cash out to work
These are the reasons I see most. Every one of them works best when the cash does more for you than it costs.
Pay off credit cards
Rolling card balances into your mortgage swaps the highest rate you pay for one of the lowest, and can cut your monthly payments by hundreds of dollars.
Clear medical bills
Payment plans on large medical bills can be short and steep. Folding them into one long loan lowers the monthly strain.
Retire a second mortgage or HELOC
Pay off a second loan you took out after buying, often a variable-rate HELOC, and lock everything into one fixed payment.
Remodel or update
Kitchens, baths, roofs and windows. Improvements can raise your home’s value, and the interest may be tax-deductible.
Add space for a growing family
A nursery, a bedroom suite or an addition costs far less than moving, and you keep your neighborhood and schools.
Start or grow a business
Equipment, a second location or working capital, often at a lower rate than a business loan and without giving up ownership.
Buy a rental property
Use your equity for the down payment and let the rental’s own loan qualify on its rent.
Buy a second home
The beach or mountain place you’ve wanted. Your equity covers the down payment so your savings stay put.
Cash from a paid-off home
Own your home free and clear? You can still take cash out, up to the same limits as everyone else.
Buy out an ex-spouse or co-owner
Keep the house after a divorce by paying your ex their share. Written into the divorce agreement, it’s often treated as a regular refinance, with better pricing.
College costs
Tuition paid from home equity can cost less than some private student loans. Compare it with federal student loans first.
Invest
Some clients invest the cash. Do it with care: you’re borrowing against your house, so the investment has to beat the loan’s cost.
What counts as cash-out
Cash-out or a regular refinance?
Lenders sort every refinance into two kinds. A rate-and-term refinance only replaces your current loan, with at most a small amount of cash back. A cash-out refinance puts more money in your hands or pays off other debts. Cash-out loans have tighter limits and slightly higher pricing, so knowing which one you need matters.
The one that surprises people is a second mortgage. If your second mortgage was taken out at the same time you bought the home, to help buy it, paying it off is a regular rate-and-term refinance. If you took it out later, like a HELOC for a remodel, paying it off counts as cash-out. Both Fannie Mae and Freddie Mac draw the line the same way.
How a cash-out refinance works
- Value the home Appraisal Sets how much you can borrow
- Pay off the old loan At closing Your old mortgage and any second are paid
- Pay off your debts At closing Cards, car or medical bills paid directly
- Cash to you The rest Wired to your account after closing
How long you need to own the home
Conventional cash-out usually needs your current mortgage to be at least 12 months old and you on title for 6 months. FHA wants 12 months of owning and living in the home.
Requirements
Cash-out refinance requirements
These are the typical limits across the cash-out programs I can access.
- Home you live in
- Up to 80%
- Conventional and FHA
- VA
- Up to 90%
- Most programs; some go to 100%
- Second home or rental
- 70% to 75%
- 2 to 4 unit rentals at 70%
- Bank statement or non-QM
- Up to 75%
- Loans to $2.5M with 720+ credit
- Ownership
- 6 to 12 months
- Depends on the loan type
- Income
- Flexible
- Pay stubs, tax returns, bank statements or rent
How much of your home’s value you can borrow
- 70% Rental, 2 to 4 units
- 75% Second home or 1-unit rental
- 75% Bank statement or non-QM
- 80% Conventional or FHA home
- Up to 90% VA home
There is no mortgage insurance on a conventional cash-out loan at 80% of value or less. Options vary by state and by program.
Checklist
Your cash-out checklist
You’ll need
- Your latest mortgage statement, plus any second mortgage or HELOC statement
- Statements for each debt you want paid off
- Income: pay stubs and W-2s, tax returns, or 12 months of bank statements if you’re self-employed
- Your homeowners insurance declarations page
- Photo ID
Nice to have
- A contractor’s bid, if the cash is for a remodel or addition
- The purchase contract, if the cash is a down payment on another property
- Your divorce decree or co-owner agreement, if you’re buying someone out
- A list of upgrades you’ve made since buying, to help the appraiser
Recently funded
Medical bills, maxed-out cards and $2,200 a month back
- North Carolina
- Location
- About $1.45 million
- Home value
- About $88,000
- Debts paid off
- About $2,200 lower
- Monthly payments
This couple first came to me in 2020 to buy a $1.2 million home with 20% down. Less than two years later, a run of unexpected medical bills hit, and their credit cards climbed far higher than they were comfortable with. They called me to ask whether the equity in their home could help.
I went through every bill with them. They owed about $48,000 on credit cards, costing $1,450 a month in minimums, and about $40,000 in medical payment plans costing $1,650 a month. Together that was $3,100 a month on top of their mortgage. Their home had climbed to about $1.45 million, which left plenty of room to fold those debts into one new loan.
The new rate was about 1 point higher than their old one, and their mortgage payment went up about $860, from roughly $4,050 to $4,910. But the credit cards and the medical bills were paid off at closing, and their total monthly payments dropped by about $2,200. The new loan came to about $1.03 million, roughly 71% of the home’s value.
Their rate went up, and they still came out far ahead. That is the part most people miss when they only compare rates.
A real loan I closed. Details that could identify the borrower are left out.
Recently funded
A divorce buyout, and the Fannie Mae rule that saved her half a point
- $950,000
- Appraised value
- $260,000 each
- Equity split
- $712,500 (75%)
- New loan
- About $800 better
- Monthly cash flow
A divorce attorney I work with referred this couple to me last year. They had agreed she would keep the house, so their two kids could stay in the same school, and he would take his half of the equity in cash. What they didn’t know yet was whether she could qualify on her own, or what the house was really worth.
I pre-approved her on her income alone before the settlement was signed, so both attorneys knew the plan would work. Then the appraisal came in at $950,000. They owed $430,000, which left $520,000 in equity, or $260,000 each.
Here is the part most loan officers miss. On paper this looks like a cash-out refinance, because she was taking $260,000 out of the house. But a little-known Fannie Mae rule says that when you buy out a co-owner under a written agreement, and you have owned the home together for at least 12 months, the loan is a regular rate-and-term refinance instead. Cash-out loans carry extra pricing, so that one rule got her a rate about half a point lower than a cash-out refinance would have.
Then I used a second little-known detail. A rate-and-term refinance can still put a small amount of cash back in your hands, up to 1% of the loan. She had about $7,000 left on her car loan. So we set her new loan at an even 75% of the home’s value, $712,500. It paid off the old mortgage, paid him his $260,000, covered the closing costs and paid off her car at closing.
Here is what that did to her monthly budget. The lower rate saved about $240 a month compared with a cash-out loan, and her $650 car payment disappeared. All told, she came out about $800 a month ahead of the cash-out loan most lenders would have written, with the car still on it. She gave up half the equity in her home and still ended up with more room in her monthly budget. His name came off the loan and the title, and she and the kids never had to move.
How a divorce buyout refinance works
- Pre-approve the keeper Before signing Prove one spouse can qualify alone
- Appraise the home $950,000 Sets the equity both sides split
- Write it into the agreement $260,000 each The buyout amount goes in the settlement
- Close the refinance $712,500 Old loan, ex and car paid; his name off the title
A real loan I closed. Details that could identify the borrowers are left out.
Watch-outs
Where cash-out refinances go sideways
Most cash-out problems come from skipping a step in the planning. Here are the five I watch for.
-
Taking more than the job needs
Every dollar you take out is a dollar you pay interest on for years. Borrow for the plan, plus a sensible cushion, not the maximum.
-
Running the cards back up
Paying off cards only helps if they stay paid off. Keep the accounts open for your credit score, but put them away.
-
Stretching debt over 30 years without a plan
A car loan spread over 30 years costs more in total. Put part of your monthly savings toward the mortgage, or slide the term shorter in the calculator.
-
Guessing high on value
Your cash depends on the appraisal. I check recent sales before we apply, so the number we plan around is realistic.
-
Forgetting closing costs
They usually run about 1.5% to 2.5% of the new loan and are usually added to it. The calculators include them so there are no surprises.
FAQ
Cash-out refinance questions I hear most
Most homeowners can borrow up to 80% of their home’s value on a home they live in, minus what they owe and the closing costs. VA loans go up to 90% on most programs, and second homes and rentals stop around 70% to 75%. The calculator above does the math for you.
It depends on when you took it out. If the second mortgage was part of buying the home, paying it off is a regular rate-and-term refinance. If you took it out later, like a HELOC for a remodel, paying it off makes the loan a cash-out refinance. Fannie Mae’s rule spells this out.
Look at your blended rate, the average rate across everything you owe. Say you owe $700,000 on your mortgage at 6.875% and $100,000 on credit cards at 22%. Your blended rate is about 8.8%. Fold the cards into one $800,000 mortgage at 7% and your blended rate drops to 7%. The $100,000 that was costing about $22,000 a year in interest now costs about $7,000, a savings of roughly $15,000 a year.
If your current mortgage rate is well below today’s rates, a HELOC usually costs less because your low rate stays put. If your rate is close to today’s or higher, or you want one fixed payment, a cash-out refinance often wins.
Yes. A cash-out refinance works on a home with no mortgage at all, up to the same limits. If you bought the home with cash in the last six months, a special rule called delayed financing can let you take that money back out.
The spouse keeping the home refinances in their own name and uses the new loan to pay the other spouse their share of the equity. If the buyout is written into your divorce agreement and you have owned the home together for at least 12 months, it is usually treated as a regular rate-and-term refinance, not cash-out. Get pre-approved before the settlement is signed, so you know the numbers work.
No. Loan money isn’t income. Whether the interest is tax-deductible depends on how you use the cash: the IRS generally allows the deduction when the money buys, builds or improves the home. Ask your tax preparer about your situation.
Applying causes a small, short-term dip from the credit check. Paying off credit cards usually helps your score over time, because the share of your card limits you’re using drops.
Yes. Terms usually run from 10 to 30 years. Shorter terms often come with a slightly lower rate and a higher payment, and you pay far less interest overall. Slide the term in the calculator to compare.
Google reviews
In their words
“Dale is wonderful at making the normally daunting mortgage process not so daunting at all. His patience, willingness to go above and beyond, and expertise were invaluable in our home buying adventure. It was a peace of mind knowing that we were truly being taken care of.”
Keep reading
Related articles and programs
Sources
- Fannie Mae Selling Guide B2-1.3-03, Cash-out refinance transactions
- Fannie Mae Selling Guide B2-1.3-02, Limited cash-out refinance transactions
- Freddie Mac, Maximum LTV ratio requirements
- HUD Mortgagee Letter 2019-11, FHA cash-out refinances
- VA, Cash-out refinance loan
- IRS Publication 936, Home mortgage interest deduction
- Federal Reserve Bank of New York, Household Debt and Credit Report, Q2 2026
- Federal Reserve G.19, Consumer credit (including credit card interest rates)
- Federal Reserve G.19, Revolving consumer credit (FRED series REVOLSL)
- NCES Digest Table 101.20, U.S. population by age (Census Bureau data)
- U.S. Census Bureau, National population by characteristics, 2020 to 2025
Program terms are typical ranges across the programs I can access and can change. Not a commitment to lend. Dale Corley, mortgage broker, NMLS #1547543.
See what your equity can do
Start an application and send your latest mortgage statement and a list of your debts. I’ll show you a cash-out refinance, a HELOC and a home equity loan side by side, then we pick the one that leaves you with the most.
Apply Now