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Does a Mortgage Calculator Determine How Much Cashout You Can Get When You Refinance?

The UpEquity Team Oct 26, 2021
mortgage calculator determine how much you can cash out refinance

A cash-out refinance replaces your old mortgage with a larger home loan, and you get to cash out the difference. It's a great way to access the equity you've built in your home, and it's typically cheaper than other loan options like unsecured personal loans.

If you are interested in refinancing your current mortgage loan, use our online mortgage calculator to help you estimate your cash out and what your new monthly mortgage payments will be. The results can vary based on your inputs from your existing mortgage loan. So, it is crucial that you enter accurate information when using an online mortgage calculator to determine estimated monthly payments based on a new loan term (15, 20, 30, 40 year), a new interest rate (fixed or adjustable) in order to receive more realistic results. A cash-out refinance can help you accomplish substantial financial goals like covering home improvement costs or paying off outstanding student loans. 

How Does Cash-Out Refinance Work?

As your mortgage matures, you gain equity in your home. As a homeowner, home equity is the value of your interest in your home and can increase in two ways:

  1. Your home increases in value
  2. You pay down your mortgage principal over time

A cash-out refinance takes advantage of the equity you’ve built in exchange for you taking on a larger mortgage. Unlike a second mortgage, you won’t have another monthly mortgage payment to your list of bills because you get to pay off your existing mortgage.

Now, the most important question is: how much cash can you get on a refinance and is it even a good idea to refinance? To answer the second question, check out this article on should you refinance a mortgage when rates are low.

To calculate the amount, you need to know three things:

  1. The current market value of your home
  2. How much you still owe on your mortgage (mortgage balance)
  3. How much equity you’ll have to retain after refinancing – most lenders allow you to access up to 80% of your home’s equity.

Lenders will appraise your home to determine how much your home is worth. Depending on the lender, you'll be allowed to borrow as much as 80% or 90% of that amount. From this new amount (you can borrow), minus what you owe on your mortgage. The difference is what you can cash out.

Does Using A Mortgage Calculator Only Determine Monthly Payments?

Purchasing or refinancing a home brings with it a number of questions. How much will my monthly payments be? What kind of interest can I get?

A regular mortgage calculator will help you figure out your monthly mortgage payments so you can see how much home you can afford. Figuring out your monthly payments is still important since you're, in essence, taking out a larger mortgage. A bigger loan can mean higher monthly payments, depending on the interest rate you're able to lock-in.

Your monthly mortgage will include the principal, interest, taxes, and insurance (PITI) you’ll have to pay. In addition to your mortgage payment, you’ll have to consider the other less obvious costs of homeownership. These include homeowners association fees, private mortgage insurance fees, and routine maintenance and repair costs.

Luckily, these costs won’t come as a surprise since you’re already living in the house you’re refinancing.

Can A Mortgage Calculator Help You Figure Out How Much Cash You Get After Refinancing?

Yes, it can. In particular, a mortgage refinance calculator will show you how much you can cash out from your refinance. Here’s an example of how this works.

Let’s say your home is currently valued at $300,000. A new home mortgage, with typical terms, will allow you to borrow up to 80% of your home’s value (or 240,000) so you can retain some equity in it. But your current mortgage balance is $150,000. From the $240,000, $150,000 will be subtracted to pay off your existing loan. The remaining $90,000 will be cashback to you.

Refinancing can reduce your monthly payments and the duration of your loan. But, this isn’t the only thing a refinance calculator will tell you. Like a standard mortgage calculator, it will also provide:

  • Monthly mortgage payment, including principal and interest. Your property taxes and homeowners insurance costs are unlikely to change.
  • Interest rate
  • Loan term

What Are The Benefits of Using A Calculator When You Want To Refinance Your Home?

A cash-out calculator is a valuable tool that will help you figure out the terms of your new loan and whether the refinance is feasible. Suppose you don't yet qualify for cash-out refinance. In that case, a calculator will provide crucial information on how much equity you'll need to build to qualify and whether it’s a good financial decision.

One overlooked benefit of mortgage calculators is that you can compare loans from different lenders. Factors that will differ from one lender to another include interest rates and how much you can borrow. This way, you’ll be able to pin down which loan works best for you.

Another great thing about mortgage calculators is that they can help you budget, so you borrow only as much as you need. You can fully plan for the cash-out, be it to make home repairs or use it for debt consolidation. They make the financial aspect of refinancing your home much infinitely easier as you can see the impact of how much your retained equity will impact your monthly payments.

All in all, mortgage calculators are invaluable tools from start to finish.

Can You Calculate The Costs/Fees Of Your Loan Using A Mortgage Calculator?

Like with your first mortgage, a cash-out refinance will come with closing costs. These fees can include appraisal fees, attorney fees, lender fees, and other expenses. You cannot use a calculator to approximate these costs since they depend primarily on the lender you choose and even the state you live in.

Still, it's essential to confirm with your lender what a cash-out refinance will cost you. The fees might not be worth the new loan, especially if you're not borrowing a large amount. Keep in mind that closing costs or escrow charges might reduce the amount of cashback you receive.

Always pay attention to the rate you’re quoted and the estimated closing costs.

Frequently Asked Questions About Mortgage Calculators and Cash-Out Refinances

#1- Does a mortgage calculator determine fees/cost of a mortgage loan

The fees of a mortgage loan vary greatly depending on your state, loan type, and mortgage lender. But, closing costs typically range from 3% to 6% of the value of the loan. Common refinance fees include application fees, appraisal costs, title search fees, and title insurance premiums. Closing costs can be paid out-of-pocket or subtracted from your cash-out funds.

Your lender will provide you with a more accurate estimation.

#2- How to use a mortgage calculator to pay off your mortgage early

A loan calculator allows you to play around with the three factors that determine the total amount you will pay for your home: loan amount, interest rate, and the mortgage term. It will also provide you with a comparison of loan amortization schedules so you can figure out which program will save you time and money.

#3- Can a mortgage calculator include taxes and insurance calculations?

Yes. In addition to the principal and interest payments paid to the lender, a mortgage calculator will also determine the amount you’ll pay in property taxes and homeowners’ insurance. Other bits will include private mortgage insurance payments, your loan pay-off date, the number of payments, and the total amount you'll have paid for the house.