13 Frequently Asked Cash-Out Refinance Questions Answered

A cash-out refi gives you access to the equity in your home. Essentially, you refinance your existing mortgage into a new one with a larger outstanding principal balance and pocket the difference. The amount of cash you receive is generally based on the difference between your home’s current value and the remaining balance on the loan, but other factors – such as occupancy, loan-to-value ratio, amount of loans on the property, etc. – can also come into play.

For example, if your home is valued at $250,000 and you owe $150,000, the amount of equity you’ve built up is $100,000. If you need $50,000, your new mortgage amount will be based on the total amount you owe plus the cash you receive, or $200,000.

Typically, a lender will limit cash-out refinance loan amounts to 80% of your home’s value. To use the same example as before, if your home is valued at $250,000 and your current mortgage balance is $150,000, you could cash-out up to $50,000—because the new loan totals $200,000, which is 80% of $250,000, your home’s current value.

Yes! Even though you already have a mortgage, your credit score still plays a part in determining your interest rate for a cash-out refi. To be eligible, your credit score must meet Newrez’s minimum standards.

While both allow the borrower to take out equity, they are different. With a cash-out, you’re refinancing your original mortgage and replacing it with a new mortgage that starts from scratch. A home equity loan is an additional loan on your home, leaving your original mortgage payment unchanged.

In most cases, you must go through the appraisal process. This is one of the most crucial steps in the refinancing process, as it establishes the market value of your home, which will determine how much money you’ll be able to cash-out.

It depends on the lender, but it generally takes between 45 and 60 days to close on your loan from the day you apply.

Yes! An FHA loan allows you to cash-out up to 85% of the property’s current value and usually requires less documentation than a conventional cash-out refinance. The VA loan process is similar to the FHA, but a VA loan cash-out refinance allows refinances up to 100% of the home’s value, depending upon what cash will be used for.

Yes, with a cash-out refinance, you are still responsible for closing costs. The amount will vary based on where you live, the property you’re refinancing, and the type of loan you choose.

That depends on a few variables, including your current interest rate, your credit score and loan-to-value ratio. If you only want to lower your rate and don’t need cash, a rate-and-term refinance makes more sense.

Yes, in most cases your payment will increase. Since your new loan will consist of your original balance plus the desired cash amount, you can expect the loan and payment size to go up.

The refinancing process may sound confusing, but a little refi know-how goes a long way. Visit our refinance page to find the refinance option that’s right for you. 

Yes, cash-out refinances do require a 6-month waiting period in addition to other requirements.

The cash pulled from a cash-out refinance can be used for anything; from consolidating debt to taking a big vacation, the choice is yours!

You do not need to pay taxes on a cash-out refinance. Since the cash-out refi is considered a loan and not income, the cash isn't taxable.

Yes, here is another great option available to you: Newrez Home Equity Loan†† is our new loan program built specifically for homeowners looking to tap the equity in their house without giving up their current mortgage. Keep your primary mortgage interest rate on your current loan when you secure a second mortgage. Just like a cash-out refinance, your money can be put toward home projects, renovations, debt consolidation, education costs, and more.†† 

For homeowners interested in getting equity out of their home while avoiding refinancing all together, Newrez has options. Happy with the rate on your current mortgage? Newrez Home Equity Loan is our new loan program that preserves the interest rate on your current mortgage while you secure cash in hand. †† 

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