CASH OUT REFINANCE CALCULATOR

A cash out refinance is when you take a portion of your home's equity out as cash while refinancing your current mortgage. A conventional refinance loan will only be for the amount that you owe on your existing mortgage, but a cash out refinance loan will increase the amount of the loan. This allows you to both replace your existing mortgage and take a lump-sum payment in cash for the additional amount of the loan.

Typically, lenders will use your Combined Loan-to-Value (CLTV) ratio to understand your ability to take on new debt. To generate your CLTV on your own, follow these steps:

• Add up the balances on all your existing home loans such as first mortgages, second mortgages or home equity lines of credit. This is your combined loan value.
• Find the estimated value for your home. You can use an online tool, compare the sale cost of similar homes in your neighborhood, or pay for an official estimate.
• Divide your combined loan amount by your estimated home value to calculate your current CLTV.

Once you know your current CLTV, you need to find out the maximum CLTV allowed by your cash out refinance lender. This may vary between lenders, but Discover Home Loans allows for loans up to 90% of CLTV. Use this maximum CLTV percentage and multiply that by your current home’s value to calculate a maximum potential loan amount. When you subtract your existing mortgage balance from that loan amount, you will have an estimate of how much cash you might be able to take out with a cash out refinance.

Let’s use the following example to walk through calculations for a cash out refinance:

A homeowner owes $200,000 on a first-lien purchase mortgage loan and $45,000 on a second-lien home equity loan.

The current home value is $400,000.

The combined loan amounts are $200,000 + $45,000 = $245,000.

The current CLTV is $245,000 / $400,000 = 61.25%.

With Discover, you can borrow up to 90% - so with CLTV 0.90 x $400,000 = $360,000 could potentially be taken out against the current value of the home.

Since $245,000 is owed on existing loans, the maximum cash out value possible with a 90% CLTV ratio is $360,000 - $245,000 = $115,000.

While the homeowner does not have to take out the full amount available, finding these values for your home can help to understand the limits of your loan application before applying. Please note that Discover offers total loan amounts between $35,000 and $300,000 on first and second liens.

A conventional refinance loan will replace the outstanding balance on your current mortgage with a new loan and potentially a new rate and term. A cash out refinance does the same thing, but it also allows you to take out an additional amount from your home equity that you can receive as a lump-sum payment. The additional amount will be included in your new loan balance. This will give you a single monthly payment for refinancing and borrowing cash from your home equity.

There are no restrictions on how to you use the lump sum payment from your cash out refinance loan. You might consider using this loan to consolidate high-interest debt, make home repairs or renovations, or support educational expenses. Compare the loan options you may qualify for to decide what will help you achieve a brighter financial future.