A cash out refinance lets you borrow money from your home's equity. With a cash out refinance, you replace your current mortgage with a new mortgage for a higher amount and get the difference in cash at closing.

For example, if you have a $150,000 mortgage balance and a large amount of home equity, you could refinance to a $200,000 mortgage and get $50,000 in cash.

Cash out refinances can give you access to a substantial amount of money when you have a large amount of home equity. The rates on these refinances are often competitive with other types of home equity loans.

You can change other terms of your mortgage when you refinance and get cash out. For example, you can change the number of years you have to pay back the loan when you refinance.

The amount of cash you can get depends on the value of your home's equity and the maximum loan-to-value ratio (LTV) requirements for the product.

You usually can't borrow the full value of your home equity. Instead, you can only borrow a portion of the amount which your LTV ratio helps define. Look at this sample calculation:

In this example, we’ve used an 80% loan-to-value ratio because that is the typical maximum LTV for conventional and FHA cash out refinances.

This means the new mortgage balance can be no more than 80% of the value of your home or $280,000. Because the homeowner in this example has a large amount of equity, they may be able to get up to $80,000 in cash by refinancing.

You can use the cash out refinance calculator on this page to estimate the amount of cash you might be able to get by refinancing your home.

You'll have to complete a new loan application, provide documents, and meet our standards to get approved for cash out refinancing. You'll have to sign loan disclosures and attend closing, too. Other requirements include:

• Substantial home equity. To get a cash out refinance, you need a large amount of home equity. To estimate your equity, take the current value of your home and subtract it from your mortgage principal amount.
• Credit score. You'll need to meet our minimum credit score requirements to get approved for a cash out refinance. If you want to get cash with a VA or FHA loan, we can often accept a score as low as 550. Learn more about cash out refinance credit scores.
• Home appraisal. We usually request a new home appraisal to estimate the current value of your home. We use this appraisal to help us determine how much home equity you have.
• Loan-to-value ratio (LTV). Your refinance's maximum loan-to-value ratio plays an important role in determining how much money you can borrow. Learn more about cash out refinancing LTVs.
• Title search. We typically request a title search to confirm there are no liens or other claims on the home which might affect our decision to approve your loan application.
• Closing costs. Closing costs for a cash out refinance can average between 2% and 6% of the loan amount according to Forbes. Sometimes you can add these costs to your loan amount. Other times, you'll have to pay them at closing.
• Investment and rental houses. Different requirements exist when you want to get cash from a home that is not your primary residence. Learn more about cash out refinances for investment properties.

Our cash out refinances take an average of 60 days from application to closing. Signing your loan disclosures promptly and providing the documents we request can help keep the process moving. You generally receive your cash within five days of closing.

Keep in mind that you will increase the amount of money you owe on your mortgage with a cash out refinance. This means you may pay more in interest over the life of your new mortgage.

A cash out refinance may also increase the number of years it takes to pay back your mortgage, which can also increase the amount you pay in interest. Learn more about cash out refinancing pros and cons.

Cash out refinances are a type of home equity loan. Another type of home equity loan is a home equity line of credit (HELOC), which works similarly to a credit card. You can withdraw cash as you need it from a HELOC up to a maximum amount based on the value of your home's equity. Learn more about the pros and cons of cash out refinances vs HELOCs.

The cash out refinance rate we may be able to offer you depends on your credit score, income, finances, the current mortgage rate market, and other factors. Freedom Mortgage may be able to offer you a rate that is lower—or higher—than the rate you see advertised by other lenders. Ask us today what cash out refinance rate we can offer you.