What Is A Cash-Out Refinance?

FAQs: Cash-Out Refinance

Before you choose a cash-out refinance, consider these frequently asked questions.

How much money can I get by cash-out refinancing?

The amount of money a borrower can get with a cash-out refinance depends on several factors, including their credit score, the type of mortgage you’re using and the type of property attached to the loan. Generally, the amount you can borrow is capped at 80% of your home’s value.

How long after cash-out refinancing do I get the money?

The average time to refinance a home is 35 – 45 days. After closing, it can take 3 – 5 days for the homeowner to receive their money.

How can a cash-out refinance lower interest rates?

If mortgage rates have gone down since you purchased your home, refinancing may provide an opportunity to lower your interest rates.

Mortgage and refinance rates are also typically more reasonable than those associated with credit cards, so if you need access to a lump sum of money, a refi will be more affordable in the long term.

Does a cash-out refinance affect my credit score?

A cash-out refinance is viewed as a new loan. The change in both your total amount of debt and your credit mix can potentially affect your credit score, but any impact on your credit report should be temporary.

Can I get a cash-out refinance on a second home?

Second homes can be refinanced in mostly the same way as primary residences, with a few small differences. Interest rates will be slightly higher on second homes than those for primary property due to the increased risk for the lender.

You’ll also be able to borrow less of your equity. Where you can borrow up to 80% of the property value on a primary property, cash-out refinances on second homes are capped at 75%.

What’s the difference between a cash-out refinance and a no-cash-out refinance?

The difference between cash-out and no-cash-out refinances mostly comes down to the amount that you refinance. In a no-cash-out refinance, your lender will refinance no greater than your current loan balance, often with the goal of reducing your interest rate or term length. Like other types of rate and term refinances, you aren’t advanced any additional cash with a no-cash-out refi.

Conversely, a cash-out refi allows homeowners with equity in their homes to refinance to a loan amount that is greater than their current balance.