How this calculator works
A cash-out refinance replaces the existing mortgage with a larger one and gives you the difference. Part of the new mortgage repays the old balance and part is new borrowing secured against your home. Because the new loan is larger, the payment rises even if the rate is lower. Lenders generally limit the loan-to-value, commonly to 80% for a conventional refinance, so the cash available depends on both the home value and the existing balance. Closing costs reduce the cash you actually receive. The interest figure covers the whole new mortgage, not just the cash you took out.
Formula
New mortgage = current balance + cash out. Loan to value = new mortgage / home value. Cash received = cash out - closing costs. i = new rate / 12; n = new term in months; A = new mortgage × i / (1 - (1 + i)^(-n)). Total interest = n × A - new mortgage. Equity remaining = (home value - new mortgage) / home value.
Worked example
A $600,000 home with a $250,000 mortgage and $50,000 of cash taken out gives a new $300,000 mortgage, a loan-to-value of 50%. After $3,500 of closing costs the cash received is $46,500. At 5.4% over 300 months the payment is $1,824.39 and total interest is $247,316.93, of which $41,219.49 is attributable to the $50,000 of cash out. The remaining equity is 50% of the home value.
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Frequently asked questions
Is the cash out taxable?
Borrowed money is not income, so the cash itself is not taxed in Canada or the United States. Interest deductibility differs by country and by what the money is used for; ask a tax adviser about your situation.
What loan-to-value will a lender allow?
Commonly up to 80% for a conventional refinance, with some programs allowing more. Lenders also assess income, credit and the property, so the limit here is a planning ceiling rather than an approval.
Does the rate apply to the whole loan?
Yes. Refinancing replaces the whole mortgage, so the new rate applies to the old balance as well as the new borrowing. Compare it with the rate on your current mortgage before deciding.
What costs should I include?
Legal and notary fees, an appraisal, the discharge and registration of the old charge, and any lender application fee. A prepayment penalty on the existing mortgage also belongs here.