Best Cash-out Refinance Lenders

You can use a cash-out refinance to secure a better interest rate while withdrawing money from your home’s equity to cover large expenses. Many homeowners use cash-out refinances for home improvements, to help pay for a child’s college tuition and to consolidate higher-interest debts. But cash-out refinances may not always make sense.

Compare cashout refinance lenders

When you’re ready to start your search for a lender, you can use our table to compare lenders and lender marketplaces by the type of home equity product you’re searching for, state availability and minimum credit score. Select See rates to provide the company with basic property and financial details for personalized rates, or select More info to read our reviews.

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Name	Product	Loan products offered	State availability	Min. credit score	‎
Veterans United Not rated yet Veterans United Not rated yet		Conventional, FHA, VA, USDA, Jumbo, Refinance	Available in all states	620	See rates More Info Compare	Veterans United stands out from other lenders for its focus on serving the military community.	loading Fetching your data...

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What is a cash-out refinance?

A cash-out refinance uses your equity for a new mortgage that’s more than what you owe. You get the difference between your old and new loans in cash to use however you want. The new mortgage may have a lower interest rate or a different loan term than your original home loan.
Cash-out refinances are different from a traditional refinance — a loan that replaces your current mortgage with a new loan for the same amount. They typically have higher interest rates than a traditional refinance, but lower rates than home equity loans and HELOCs.

How a cash-out refinance works

A cash-out refinance taps into your home’s equity, giving you access to cash that you can withdraw in a lump sum. Most lenders only allow you to refinance a maximum of 80% of your home’s current value — the maximum loan-to-value ratio — for conventional and FHA loans. After you subtract what you owe, which pays off your first mortgage balance, you can collect the rest in cash.
So, if your home is valued at $200,000, the highest loan amount for your cash-out refinance could be $160,000, or 80%. If you owe $100,000 on your current mortgage, you could receive $60,000 in cash to put toward expenses like renovations or to pay down debts.

Cash-out refi costs and fees

Whenever you refinance, you’re taking out a new mortgage, which requires a loan application and closing costs. Although closing costs vary by state and lender, you can expect to pay about 2% to 5% of the loan amount — that’s between $4,000 to $10,000 on a $200,000 mortgage.

When a cash-out refinance makes sense

A cash-out refinance could be a good idea if you’ve had your mortgage for a few years and built some equity in your home. You can use the cash for a large purchase and may be able to secure a lower interest rate at the same time. And there may be tax benefits if you use the money to make home improvements to increase your home’s value. Consult a tax professional for more information specific to your situation.

When a cash-out refinance may not be a good idea

You may want to avoid a cash-out refinance if you don’t intend to stay in your home very long, and the closing costs outweigh your savings.
It may be a good idea to steer clear if a cash-out refinance adds PMI back into your monthly payment. You could stand to lose any potential savings from a lower interest rate if you add PMI to your monthly payment, which can cost about 0.3% to 1.2% of the loan amount every year — that’s an extra $50 to $200 per month on a $200,000 mortgage.

Pros and cons of a cash-out refinance

There are reasons to get a cash-out refinance, but they also come with a few risks.

Cash-out refinance alternatives

If a cash-out refinance doesn’t make sense, consider a few other options.

• HELOC. A home equity line of credit works like a credit card. You can withdraw from this revolving line of credit up to the loan maximum during the draw period and only pay interest. Then, during the repayment period, the HELOC switches to a variable-interest rate where you’ll pay back the loan balance plus interest.
• Home equity loan. Another loan that taps into your equity with a fixed interest rate that gives you a lump sum of cash to spend as you choose.

Bottom line

A cash-out refinance is about the numbers. If you intend to stay in your home long term and can secure a lower interest rate, a cash-out refinance may be a good idea. But crunch the numbers by comparing your refinancing options to make sure it’s worth the closing costs.

Frequently asked questions

• Does a cash-out refinance require an appraisal?

  Yes, most cash-out refinances require an appraisal. But in some cases, you may qualify for an appraisal waiver. For example, Fannie Mae considers appraisal waivers if your cash-out refinance has a loan-to-value maximum ratio of 70% for primary residences.

• Can I do a cash-out refinance on an investment property?

  Yes. It’s possible to do a cash-out refinance on an investment property, but stricter underwriting requirements may make it more difficult to qualify for than a refinance of your primary residence.

• Is money from a cash-out refinance taxable?

  No. Fortunately, the funds from a cash-out refinance are not taxable because you aren’t making money. Since it’s money from your equity, or what you already own, it’s not considered income.

Written by

Kimberly Ellis

Writer

Kimberly Ellis is a personal finance writer at Finder, specializing in banking and financial literacy. After teaching in public and private schools, Kimberly zeroed in on personal financial education to help families and kids develop lifelong money skills. She hails from New York City, graduating summa cum laude from Queens College with a BA in elementary education and mathematics, as well as a New York State teaching certificate. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick. See full bio

Kimberly's expertise

Kimberly has written 94 Finder guides across topics including:

• Kids' banking
• Financial literacy for kids
• K–12 education