Home equity
Cash-out refinance
A refinance for more than you owe, taking the difference in cash from your home's equity — replacing your entire first mortgage in the process.
What does cash-out refinance mean?
A cash-out refinance pays off your existing mortgage and replaces it with a larger one, handing you the difference in cash from your equity.
It can consolidate debt or fund a big expense, but it comes with a major caveat in today's market: it resets your whole first mortgage to the current rate.
For the many Michigan owners holding a sub-5% first mortgage, that trade is expensive — a fixed home equity loan or HELOC usually wins because it leaves the low first-mortgage rate untouched while still accessing equity.
A Michigan example
Your home is worth $285,000 and you owe $150,000 at a low rate. A cash-out refinance to 80% LTV — $228,000 — could hand you about $78,000 before costs.
But that entire $228,000 now carries today's higher rate, not just the cash you pulled. If your existing rate is well below the market, a second-lien loan may cost far less overall.
Common questions
How much can I cash out?
Typically down to 80% loan-to-value on a conventional cash-out, so you keep at least 20% equity. On a $285,000 home, that caps the new loan near $228,000. VA offers higher limits for eligible veterans.
Related terms