What is a cash-out refinance?

A cash-out refinance is a type of mortgage refinance that lets you convert your home equity into cash. It replaces your existing home mortgage with a new, larger loan, and pays you the difference between the new and old mortgage amount at closing. Accessing equity and using the funds to consolidate debt or fund a major project are just a few reasons to use a cash-out refinance.

Use the equity in your home to pay for home improvements, college tuition or a down payment on a second home.

Use the money to pay off high-interest debt, such as credit cards, personal loans and auto loans.

If you’d like to take advantage of lower interest rates and get cash in hand, cash-out refinancing may be the right choice for you. Keep in mind that while cash-out refinance rates may be slightly higher than those for traditional refinancing, the potential benefits of this type of loan can be significant.

See current refinance rates

  • Credit score – Your credit score helps determine the rate you’ll get. When it comes to refinancing, the higher your score, the better. If you’re a U.S. Bank client, you can check your credit score for free with our tool.
  • Home equity – As a general rule, you should have at least 20% equity in your home before refinancing. You can calculate your home equity by subtracting the amount you owe on your mortgage from the amount your home is worth. For example, if your home is valued at $250,000 and you owe $150,000 on your mortgage, you have $100,000 in equity.
  • Closing costs – A cash-out refinance comes with closing costs comparable to your first mortgage. Typically, you can expect to pay between 2% and 5% of the loan amount. So on a $200,000 home loan refinance, you could pay between $4,000 and $10,000 in closing costs.
Check your score Calculate your closing costs

Estimate how much cash you could borrow.

Determine your home equity.

As an example, let’s say your home is worth $300,000. The remaining balance on your mortgage is $100,000.

$300,000 – $100,000 = $200,000

That means you have $200,000 in equity.

Calculate your maximum loan amount.

In general, the maximum loan amount that lenders allow is 80% of your home’s value (up to 90% in some cases). This is called loan-to-value (LTV).

$300,000 x 80% LTV = $240,000

That means you could refinance your home for up to $240,000.

Estimate the cash you could borrow.

If you choose to refinance your home for $240,000, you can subtract the amount you still owe on your home from the refinance amount to estimate the cash you can borrow.

$240,000 – $100,000 = $140,000

That means you can borrow up to $140,000.

Compare your refinance loan options.

Here are some of our popular options for a cash-out refinance. Or you can compare all loans and rates.

Conventional fixed-rate refinance loans

Why it may be right for you:

  • Keeps the same interest rate for the life of the loan
  • Rate consistency can help with budgeting
  • You plan to stay in the home for a long time
Conventional 30-year term
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Adjustable-rate mortgage (ARM) refinance loans

Why it may be right for you:

  • Initial ARM rates are lower than comparable fixed-rate loans
  • Initial rate periods last 5–10 years, and then rates can adjust up or down
  • You plan to move within the next few years
Conventional 10/6 ARM
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FHA refinance loans

Why it may be right for you:

  • Keeps the same interest rate for the life of the loan
  • Down payments can be lower
  • Qualification guidelines are more flexible than other loans
FHA 30-year term
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Showing Rates for
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These rates are based on some standard assumptions as described below.1 Learn more about interest rates and annual percentage rates (APRs).2 Plus, see an estimated conforming fixed-rate monthly payment and APR example.3

Get answers to frequently asked cash-out refinance questions.

A cash-out refinance lets you refinance your mortgage and borrow money at the same time. You apply for a new mortgage that pays off your existing one (and any liens on your property) and withdraw a portion of your home’s equity as a lump sum.

No. The cash you collect from a cash-out refinance isn’t taxed. The money you receive is a loan you take out against your home’s equity, and isn’t considered income.

A cash-out refinance typically takes 30 to 45 days to complete. However, the length of time may vary depending on the size of your property, how complicated your finances are and how long it takes to complete your appraisal and inspection.

A cash-out refinance lets you negotiate new mortgage terms and borrow funds for one-time expenses. A home equity loan allows you to borrow against the equity in your home and pay it back with a steady repayment schedule. Choosing a cash-out refinance or home equity loan comes down to the terms that are best for you and your situation.

A VA cash-out refinance is designated for active or retired members of the military and eligible surviving spouses. It’s a government-backed loan that allows you to replace your current mortgage with a new one under different terms and also borrow cash from the equity in your home. It comes with additional benefits too, like low or no equity options, no mortgage insurance requirement and flexible qualification guidelines.

An FHA cash-out refinance differs from a conventional cash-out refinance in that the Federal Housing Administration insures your new mortgage. With mortgage insurance, your lender is protected against any loss if you fail to pay your mortgage. And because lenders take on less risk, they’re able to offer you more options. Other benefits include a consistent rate and flexible qualification guidelines for qualified borrowers.

Not sure what your home improvement project could cost?

It you’re thinking about a home improvement project but aren’t sure of the cost, we’re happy to help. Just answer a few quick questions and we’ll give you a personalized estimate based on the average cost of labor and materials where you live.

Get an estimate for your project

Looking for other refinance and loan options?

Rate-and-term refinance

Good if interest rates decrease

  • New mortgage terms
  • Option to change mortgage loan type
  • Keeps your existing mortgage balance
Learn more

Home equity loan

Better for one-time expenses

  • Fixed interest rates
  • A predictable repayment schedule
  • Terms up to 30 years.4
Learn more

Home equity line of credit

Better for ongoing access to funds5

  • Rates typically lower than credit cards
  • Flexible repayment options
  • The option to lock in a fixed rate
Learn more

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Disclosures

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.

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  1. The rates shown above assume you have a FICO® Score of 740+ and at least 25% equity for a conventional fixed-rate loan, an adjustable-rate mortgage (ARM) loan or a jumbo loan, at least 3.5% equity for an FHA loan and no equity for a VA loan. They also assume the loan is for a single-family home as your primary residence and you will purchase up to one mortgage point. Mortgage points, or discount points, are a form of prepaid interest you can choose to pay up front in exchange for a lower interest rate and monthly payment. One mortgage point is equal to about 1% of your total loan amount, so on a $250,000 loan, one point would cost you about $2,500. Connect with a mortgage loan officer to learn more about mortgage points.

  2. Annual percentage rate (APR) represents the true yearly cost of your loan, including any fees or costs in addition to the actual interest you pay to the lender. The APR may be increased after the closing date for adjustable-rate mortgage (ARM) loans.

  3. Conforming fixed-rate estimated monthly payment and APR example: A $464,000 loan amount with a 30-year term at an interest rate of 6.500% with borrower equity of 25% and no discount points purchased would result in an estimated monthly principal and interest payment of $2,933 over the full term of the loan with an annual percentage rate (APR) of 6.667%.

    Estimated monthly payment and APR calculation are based on borrower equity of 25% and borrower-paid finance charges of 0.862% of the base loan amount. If the borrower equity is less than 20%, mortgage insurance may be required, which could increase the monthly payment and the APR. Estimated monthly payment does not include amounts for taxes and insurance premiums and the actual payment obligation will be greater.

  4. Home Equity Loan: As of March 15, 2024, the fixed Annual Percentage Rate (APR) of 7.65% is available for 10-year second position home equity installment loans $50,000 to $99,999 with loan-to-value (LTV) of 60% or less. Rates may vary based on LTV, credit scores or other loan amount. In order to receive the lowest rate advertised, a set-up of automatic payments from a U.S. Bank personal checking or savings account is required but neither are required for loan approval. Clients in certain states are eligible to receive the preferred rate without having automatic payments from a U.S. Bank personal checking or savings account. Loan payment example: on a $50,000 loan for 120 months at 7.65% interest rate, monthly payments would be $597.43. Payment example does not include amounts for taxes and insurance premiums. The monthly payment obligation will be greater if taxes and insurance are included and an initial client deposit may be required if an escrow account for these items is established. Home equity loans not available for properties held in a trust in the states of Hawaii, Louisiana, New York, Oklahoma and Rhode Island. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Property insurance is required. Other restrictions may apply.

  5. Home Equity Line of Credit: The Annual Percentage Rate (APR) is variable and is based upon an index plus a margin. The APR will vary with Prime Rate (the index) as published in the Wall Street Journal. As of November 8, 2024, the variable rate for Home Equity Lines of Credit ranged from 8.20% APR to 11.85% APR. Rates may vary due to a change in the Prime Rate, a credit limit below $50,000, a loan-to-value (LTV) above 60% and/or a credit score less than 730. A U.S. Bank personal checking account is required to receive the lowest rate, but is not required for loan approval. Clients in certain states are eligible to receive the preferred rate without having a U.S. Bank personal checking account. The rate will never exceed 18% APR, or applicable state law, or below 3.25% APR. Choosing an interest-only repayment may cause your monthly payment to increase, possibly substantially, once your credit line transitions into the repayment period. Repayment options may vary based on credit qualifications. Interest-only repayment may be unavailable. Loans are subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Credit line may be reduced or additional extensions of credit limited if certain circumstances occur.

    An early closure fee of 1% of the original line amount, maximum $500, will apply if the line is paid off and closed within the first 30 months. Property insurance is required. Other restrictions may apply. An annual fee of up to $75 may apply after the first year and is waived or discounted with an existing U.S. Bank Platinum Checking Package or with enrollment in our Smart Rewards Program. Annual fees are assessed based on the tier in our Smart Rewards Program on your HELOC anniversary date. Please refer to your Smart Rewards terms and conditions for more information on tier assignment.

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The rates shown above are the current rates for the purchase of a single-family primary residence based on a 45-day lock period. These rates are not guaranteed and are subject to change. This is not a credit decision or a commitment to lend. Your final rate will depend on various factors including loan product, loan size, credit profile, property value, geographic location, occupancy and other factors.

To lock a rate, you must submit an application to U.S. Bank and receive confirmation from a mortgage loan officer that your rate is locked. An application can be made by calling 888-291-2334, by starting it online or by meeting with a mortgage loan officer.

Minnesota properties: To guarantee a rate, you must receive written confirmation as required by Minnesota Statute 47.206. This statement of current loan terms and conditions is not an offer to enter into an interest rate or discount point agreement. Any such offer may be made only pursuant to subdivisions 3 and 4 of Minnesota Statutes Section 47.206.