Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash at closing. It turns home equity into funds you can use, and it also replaces the rate on your entire balance.

Justin Lazzaro, NMLS #1229453 | Reasy Financial, LLC, NMLS #2446155 | Licensed in Arizona, Pennsylvania, Florida, and Texas

Who a cash-out refinance fits

Cash-out works best when the new loan is a good loan on its own, not only a way to reach your equity.

Owners with meaningful equity

Lenders limit how much of the home's value you can borrow against, and the limit is tighter than on a regular refinance.

Owners whose rate is near the market

If your current rate is close to or above today's rates, replacing the whole loan costs you little or nothing on the rate.

Who it usually does not fit

If your first mortgage has a low rate, a HELOC or second mortgage usually costs less than giving that rate up.

How a cash-out refinance works

1

We size the equity

The home's appraised value and the program's limits determine how much cash is available.

2

We document income and credit

Conventional, FHA, and VA cash-out loans use full documentation. Self-employed borrowers and investors may qualify through bank statement or DSCR programs.

3

The old loan is paid off at closing

The new loan pays off your current mortgage, and the remaining funds come to you after any required waiting period.

Most programs require that you have owned the home and made on-time payments for a set period first. Texas has its own home equity lending rules, and some cash-out products are not offered there.

How it compares to other options

All three options reach your equity. The difference is what happens to your current mortgage.

How a cash-out refinance compares to other options
OptionWhat happens to your first mortgageUsually a fit when
Cash-out refinanceReplaced with a new, larger loanYour current rate is near or above the market
HELOCStays in place, and a revolving line is added behind itYou want to draw funds over time and keep a low first mortgage rate
Closed-end second mortgageStays in place, and a fixed lump-sum loan is added behind itYou need a set amount once and want a fixed payment
Rate and term refinanceReplaced with a new loan of about the same sizeYou want a better loan and do not need cash

Three things to know before you apply

1

Your whole balance gets a new rate

Cash-out pricing is usually a little higher than a regular refinance, and it applies to everything you owe, not only the new money.

2

Unsecured debt becomes secured

Paying off credit cards with home equity can lower the monthly cost, and it also ties that debt to your house.

3

Closing costs apply

They are similar to a purchase loan. Borrowing a small amount this way can be expensive compared with a second mortgage.

Guidelines change. I confirm current requirements with the lender before quoting anything. You can test your own numbers with the refinance calculator.

Common questions about cash-out refinancing

Short answers to common questions. Program rules vary by lender, so treat these as general guidance, not a loan decision.

What can I use the money for?

Most programs do not restrict it. Common uses are home improvements, paying off higher-interest debt, and funding an investment property purchase.

How much can I take out?

It depends on the appraised value, the loan program, the property type, and your credit. Outside Texas, VA loans generally allow the most, and investment properties the least.

Is the cash taxable?

Loan proceeds are generally not income, and interest deductibility depends on how the funds are used. Ask your tax advisor about your situation.

Can I do a cash-out refinance on a rental?

Yes. Conventional and DSCR programs both allow it, with lower limits than on a primary home.

How long do I have to own the home first?

Most programs require a waiting period after purchase and a history of on-time payments. The details vary by program.

Where do you offer cash-out refinances?

I am licensed in Arizona, Pennsylvania, Florida, and Texas. Texas homestead cash-out follows separate state rules, which I will walk you through.

Ready to talk it through?

Pick a time that works for you. We'll go over your goals and next steps, no pressure, just a conversation. Prefer to call or text instead? Reach me directly at (412) 638-4982, or book a quick Zoom if that's easier.