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 does a cash-out refinance work?
It replaces your mortgage with a larger one and hands you the difference in cash from your equity. The catch is that it resets your entire first mortgage to today's rate, not just the portion you cash out.
Cash-out refinance or home equity loan?
If your first-mortgage rate is low, a home equity loan or HELOC usually wins — it leaves that low rate alone while still tapping equity. A cash-out refinance makes more sense when today's rate is at or below your current one.
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.
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