Refinancing · Florida

Cash-out refinance

A cash-out refinance replaces your entire first mortgage to reach a slice of equity. Whether that is smart depends almost entirely on the rate you would be giving up.

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Should you do a cash-out refinance or a HELOC?

If your first mortgage carries a rate you could not replace today, a cash-out refinance means surrendering that rate on the whole balance to access part of your equity — usually a bad trade. A HELOC borrows only what you need and leaves the first mortgage alone. If your current rate is at or above market, cash-out may well win.

The trade in plain numbers

Suppose you owe $340,000 at 3.5% and want $100,000. A cash-out refinance re-prices the entire $440,000 at today's rate. A HELOC prices only the $100,000, leaving $340,000 at 3.5% untouched.

Even at a higher HELOC rate, borrowing $100,000 expensively usually beats re-pricing $440,000. When your existing rate is at or above market, that logic reverses and cash-out becomes the cheaper route.

ReplacesYour first mortgageEntire balance re-priced

Alternative5 Day HELOCLeaves the first alone

Decides itYour current ratevs today's market

Both modelledSide by sideBefore you commit

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Straight answers

Frequently asked

How much equity do you need for a cash-out refinance?

Most conventional cash-out refinances require you to retain at least 20% equity after the cash is taken, so a maximum loan-to-value of 80%. VA cash-out can go higher for eligible veterans.

Is cash-out refinance money taxable?

Borrowed money is not income, so proceeds are generally not taxable. Whether the interest is deductible depends on how the funds are used, and that is a question for your tax adviser rather than your mortgage broker.

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