A cash out refinance is a financial maneuver that allows homeowners to refinance their mortgage for more than they owe and take the difference in cash. It essentially replaces the current mortgage with a new one, potentially with different terms, and allows homeowners to access the equity they've built in their property in liquid funds. This type of refinancing can be a strategic financial tool for consolidating debt, making home improvements, or for other investments.
The process of a cash-out refinance involves applying for a new mortgage that is larger than the remaining balance of the existing mortgage. Here’s how it typically works:
The maximum amount you can borrower through a cash out refinance is typically around 80% of the value of the home. For example, if your home is valued at $300,000, you might be able to get a new mortgage for $240,000. If you owe $150,000 on your existing mortgage, you could potentially receive $90,000 in cash after closing the new mortgage.
The requirements for a cash out refinance are similar to those for a standard mortgage, including:
Various loan programs are available for those interested in a cash out refinance, each catering to different borrower needs and circumstances. Here’s a closer look at some of our most common options:
This is a standard cash out refinance that conforms to the loan limits and requirements set by Fannie Mae and Freddie Mac. Borrowers typically need a credit score of at least 620 and must have a debt to income ratio of no more than 50%. Conventional loans allow homeowners to refinance up to 80% of their home's value, which means you need to maintain at least 20% equity in your home after the refinance.
The Federal Housing Administration (FHA) offers cash out refinancing for those with lower credit scores and less home equity. Borrowers usually need a credit score of 580 and lust have a debt to income ratio of no more than 57%. FHA cash out refinance allows up to 80% loan-to-value ratio in the new mortgage. This option requires mortgage insurance, regardless of the equity stake, which could increase the overall cost of the loan but makes refinancing accessible for those with less than perfect credit.
Available to veterans, active-duty service members, and select military spouses, VA cash-out refinance options are offered through the U.S. Department of Veterans Affairs. This program allows borrowers to refinance up to 100% of their home's value, which is a higher potential cash out than other loan types. A significant benefit of this option is the absence of mortgage insurance and potentially lower interest rates.
Non-Qualified Mortgage loans (Non-QM loans) are often used by borrowers who have non-traditional income sources or who are investors. These loans can be more flexible in terms of income verification and credit score requirements. Non QM loans usually allow borrowers to refinance up to 80& of their home's value.
A reverse mortgage cash out refinance is available to homeowners who are 62 years or older. It allows them to convert part of the equity in their homes into cash without having to sell the home or take on additional monthly mortgage payments. Instead, the loan is repaid when the borrower moves out or sells the home. This can be a valuable financial tool for retirees needing to supplement their income.
Cash-out refinancing offers several advantages:
Alpine Mortgage maintains a team of highly skilled industry professionals familiar with the company’s refinance rates and its cash out refinance products. We offer cash out refinances in the following states: California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Texas.
Call us today at (800) 876-LOAN to speak with one of our cash out refinance specialists or click here to have one of our cash out refinance specialists contact you.
If you are interested in applying for a cash out refinance, you can apply online now.
You can view our current cash out refinance rates on our conventional, FHA and VA loan programs. If you need a quote on any other loan program, please contact us for a quote.
While both allow you to tap into your home equity, a cash out refinance replaces your existing mortgage with a new one that typically has different terms, potentially including a different interest rate and loan duration. A home equity loan, on the other hand, serves as a second mortgage without altering the terms of your existing mortgage.
Yes we have bad credit loan programs for borrowers interested in a cash out refinance with credit issues or low credit scores. For many of these borrowers, a cash out refinance can be a good solution to payoff other debts and improve their credit
Yes, but you will have to pay off the second mortgage as part of the process unless the second mortgage lender agrees to "subordinate" that loan, which means it remains secondary to the new first mortgage
