Current cash-out refinance rates
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Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2000, he spent more than 20 years writing about real estate, business, the economy and politics.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.
Comparison-shopping for a mortgage isn’t just smart — it’s crucial to get the most competitive rate and mortgage terms. Even a 0.1 difference in an interest rate can save thousands of dollars over the life of the loan. Bankrate’s mortgage rate table allows you to easily compare personalized rates from our marketplace of trusted lenders. Here is how to compare mortgage offers on Bankrate in 3 easy steps:
- Determine the right type of mortgage: There are a lot of options in home loans, so it’s important to research and decide what type of mortgage might be best for you, given your finances and your short- and long-term goals.
- Gather necessary documentation: In order for lenders to give you the most accurate quote, you will need to provide paperwork once connected with a lender that verifies your income, assets, debts and employment.
- Compare mortgage offers online: Bankrate helps you easily compare mortgage offers by using our mortgage rate table below. Our rate table filters allow you to plug in general information about your finances and location to receive tailored offers. As you weigh offers, be sure to consider APRs, lender fees and closing costs to ensure you’re making accurate comparisons — and maximizing your savings potential.
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How to compare offers
Comparison-shopping for a mortgage isn’t just smart — it’s crucial to get the most competitive rate and mortgage terms. Even a 0.1 difference in an interest rate can save thousands of dollars over the life of the loan. Bankrate’s mortgage rate table allows you to easily compare personalized rates from our marketplace of trusted lenders. Here is how to compare mortgage offers on Bankrate in 3 easy steps:
- Determine the right type of mortgage: There are a lot of options in home loans, so it’s important to research and decide what type of mortgage might be best for you, given your finances and your short- and long-term goals.
- Gather necessary documentation: In order for lenders to give you the most accurate quote, you will need to provide paperwork once connected with a lender that verifies your income, assets, debts and employment.
- Compare mortgage offers online: Bankrate helps you easily compare mortgage offers by using our mortgage rate table below. Our rate table filters allow you to plug in general information about your finances and location to receive tailored offers. As you weigh offers, be sure to consider APRs, lender fees and closing costs to ensure you’re making accurate comparisons — and maximizing your savings potential.
The Bankrate Promise
Bankrate has helped people make smarter financial decisions for 40+ years. Our mortgage rate tables allow users to easily compare offers from trusted lenders and get personalized quotes in under 2 minutes. While our priority is editorial integrity, these pages may contain references to products from our partners. Here is how we make money.
Data points are accurate as of July 14th, 2023. Calculations are based on the comparison of Bankrate’s top offers on 30-year fixed purchase rates vs. the national average 30-year fixed purchase rate, assuming a $340,000 loan amount. The national average is calculated by averaging interest rate information provided by 100-plus lenders nationwide.
What is a cash-out refinance?
A cash-out refinance is a type of mortgage refinance that turns a portion of your home equity into cash. With a cash-out refi, you’ll swap your current mortgage for a bigger mortgage, pocketing the difference between the two loans (your current one and the new one) in a lump sum. Whether it’s for a home renovation, college tuition or other expenses, you can use these funds for any purpose.
Cash-out refinancing works much like any other refinance: You apply for a new mortgage, the lender appraises the home, and — if you’re approved — you receive the new loan and use it to pay off the old.
Many mortgage lenders offer cash-out refinancing — here are some of our picks. While you might be offered a good deal or perks with your current lender, shop around and compare refinance rates and fees between a few lenders.
Cash-out refinance requirements
As with any mortgage, you must meet certain financial criteria to qualify for a cash-out refinance. Here are a few of the general requirements:
- Credit score: Most cash-out refinances require a credit score of 620 or higher.
- Debt-to-income (DTI) ratio: Your DTI is a measure of your monthly debt payments against your income. Most lenders limit your DTI ratio to 43 percent for a cash-out refinance.
- Equity: You’re required to keep a minimum of 20 percent equity in your home. (The big exception to this is if you’re doing a VA cash-out refinance.)
Reasons to get a cash-out refinance
Here are some common reasons to get a cash-out refinance:
- Make home renovations or repairs
- Pay college tuition or student loans
- Consolidate high-interest debt
- Purchase an investment property
How much money can you get in a cash-out refinance?
You can get up to 80 percent of your home’s current value in a cash-out refinance. You’ll receive the cash shortly after closing.
Let’s say your home is valued at $300,000 and you have $100,000 left to pay on your mortgage. If you wanted to get $30,000 for a renovation, you’d cash out $30,000 and add that to your $100,000 balance, for a new loan totaling $130,000.
Note that FHA cash-out refinances are also limited to 80 percent of your home’s value, but with a VA cash-out refinance, you can get up to 100 percent.
Pros and cons of cash-out refinancing
Cash-out refinancing has several pros and cons:
Pros of cash-out refinance
- Access to cash: You can turn your equity into a liquid asset you can use to cover home repairs or pay for college tuition, or anything else you need it for.
- Increase your home value: If you use a cash-out refinance to renovate your home with a kitchen remodel or an addition, for instance, you could grow the value of your home.
- Lower interest rates: Mortgages come with lower interest rates when compared to credit cards, personal loans and other forms of debt. You can use a cash-out refinance to pay off this higher-interest debt, which could save you money on interest and better your credit score by lowering your credit utilization.
Cons of cash-out refinance
- Owing more money: A cash-out refinance replaces your old mortgage with a new, larger mortgage. This means you’ll owe more, and could have a higher monthly payment.
- Closing costs: You’ll have to pay for some closing costs like you did for your original mortgage.
- Foreclosure risk: Unlike credit cards and personal loans, mortgages are secured debt, with your home as collateral. If you’re unable to make your mortgage payments, your home will eventually be subject to foreclosure.
How to get the best cash-out refinance rate
Start by focusing on your credit score and DTI ratio. Paying down your debts can help improve both of these factors.
When you’re ready to shop around for rates, compare offers from at least three lenders. Assess both the interest rate and APR you’re quoted, noting that APRs are higher because they include points and fees.
Cash-out refinance FAQs
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You generally need at least 20 percent equity in your home to do a cash-out refinance because lenders usually don’t allow for more than 80 percent of the total equity to be in debt for non-VA borrowers.
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Like other types of loans, cash-out refinances come with closing costs that can range from 2 percent to 5 percent of the new loan amount. Closing costs cover expenses such as appraisal, credit check and lender origination fees.
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To do a cash-out refinance, you’ll generally need to wait at least six months after buying a home and have a minimum of 20 percent equity. This waiting period is referred to as “seasoning.”
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A cash-out refinance might be a good idea if you want to renovate your home, pay for your child’s tuition or consolidate high-interest debt. It might not be a good idea if your interest rate will rise, you can’t afford the closing costs or you’ll have trouble paying your new, higher mortgage payment.
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In the low-rate world of 2021, a cash-out refi was a no-brainer. In 2023, with interest rates on the rise, alternatives to a cash-out refinance might better help you reach your goals. The two prime candidates are:
- A home equity line of credit: A HELOC lets you tap your home equity as you need it. This type of financing typically carries a variable interest rate.
- A home equity loan: This second mortgage carries a fixed interest rate.
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A cash-out refinance replaces your current mortgage with a larger loan, with you taking the difference between the new and old loan in cash. Like other types of refinances, you can redefine the terms of your mortgage, such as the interest rate and term.
A home equity loan is a separate, second mortgage, and doesn’t change the terms of your primary home loan. Home equity loans generally have a higher interest rate than primary mortgages even with a cash-out refi, but the closing costs can be lower since the balance on a home equity loan is usually lower than that of a primary mortgage. Both typically require you to maintain at least 20 percent equity.
If your goal is to take out a significant amount of cash and get a lower rate, a cash-out refinance could be the better option. If you can afford both your first and second mortgage payments and don’t want to change the terms of your first mortgage — maybe you’ve already paid down most of it — a home equity loan might be the right option for you. -
What about the tax implications of a cash-out refinance? Good news – the proceeds are not taxable. The money you receive from your cash-out refinance is essentially a loan you’re taking out against your home’s equity. Loan proceeds from a HELOC, home equity loan, cash-out refinance and other types of loans are not considered income.
You can deduct the interest you pay on your new mortgage from your taxable income if you use the cashed-out funds to make capital improvements on your home. Deduction-eligible projects generally include permanent additions and home improvements that increase the property’s value, extend its longevity or adapt it for new uses. Consider consulting with a tax professional to ensure the projects you’re doing qualify. It’s up to you to prove you used the money in a way that qualifies when you file your taxes, so save receipts and other paperwork associated with your projects.
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