12 Best Cash-Out Refinance Loans of 2022

 

12 Best Cash-Out Refinance Loans of 2022


If you're interested in accessing your home equity with a cash-out refinance, we'll help you choose the best cash-out refi lender. Our top picks include both all-digital online specialists and banks for in-person service.

cash-out refinance could be right for you if you need money for home repairs or renovations, or if you want to consolidate high-interest debt. The process involves refinancing your home for more than you owe on the existing mortgage. You get the difference to use on whatever you need. It can be a helpful way to tap your home's equity for major expenses.

Your options for cash-out refinance lenders are extensive, from all-digital outfits with speedy online applications to major banks with branches nationwide for in-person service.

To help you narrow down your choices, NerdWallet has picked some of the best cash-out refinance lenders in several categories so you can quickly determine the right one for you.

What Is a Cash-Out Refinance?

A cash-out refinance involves taking a new mortgage loan in excess of your current mortgage balance. For example, if you owe $150,000 on your mortgage, you could take out a new $200,000 mortgage, depending on your home’s value and the equity you have built up. You’d use $150,000 to pay off your existing mortgage and keep the rest.


Cash-out refinances can be used for many things, including:


Home improvements

Debt consolidation

College tuition

A down payment on a second home or home for your child

Other major purchases

Any time you want to put access your home equity to use the funds for other things, a cash-out refinance could be the solution.

Where to get a cash-out refinance loan?


Most mortgage lenders offer cash-out refinancing as an option. This includes traditional banks and credit unions, as well as online lenders. You can use Credible’s cash-out refinance calculator to help you determine the amount of cash you’ll be able to take out, based on the equity you have in your home.

No matter which lender you choose, a cash-out refinance has its benefits and drawbacks. For example, you can access the cash you need without adding a loan to your debt burden, but you also eat into the equity you’ve built up in your home.

Best cash-out refinance lenders


Consider these lenders for your cash-out refinance.

3 best cash-out refinance lenders


The following lenders are Credible partners that can help you tap your home equity through a cash-out refinance. 

Caliber Home Loans

Best for: Veterans

Caliber Home Loans is a national lender with expertise in lending to current military members, veterans, and their spouses — though you don’t need military experience to borrow from Caliber.  

Pros


Expertise in VA loans — If you’re seeking a VA loan cash-out refinance, Caliber’s military and veteran lending experts can help you out. While Caliber is a Credible partner, Credible doesn’t offer VA cash-out refinances. But Credible can help you find a great rate on a standard cash-out refinance.
Available nationwide — Caliber lends in all 50 states and has branches across the country.
Specialty loans for nontraditional borrowers — Caliber’s "Smart Series" of loans includes options if you need a jumbo loan after a negative credit event, are a self-employed borrower, or a real estate investor.

Cons


Mortgage rates not available online — Caliber Home Loans doesn’t publish current mortgage rates online, making it harder to shop around.
No cash-out refinance calculator — While Caliber offers a refinance calculator, you don’t have the option to enter a cash-out amount.
Home equity loans not available — Other ways of taking cash out of your home won’t be found at Caliber.
loanDepot

Best for: Multiple refinances


loanDepot offers a fully online mortgage application and is licensed in all 50 states. 

Pros


Fees waived on future refinances — Once you refinance with loanDepot, the company advertises a "Lifetime Guarantee" where it’ll waive your lender and appraisal fees if you decide to refinance again with the company down the line.
Convenient appointment scheduling — You can schedule a phone call with a loan officer online, so you won’t have to call in and wait on hold.
In-person service available — loanDepot has more than 200 branches nationwide, so you can talk to a loan officer in person if you prefer.

Cons


Must apply to see rates — Before you can see interest rates, you’ll need to start a loan application.
No cash-out calculator — It’s more difficult to find out how much money you can take out without this feature.
No home equity loans — If you decide against a cash-out refinance and want to tap home equity another way, you’ll need to choose another lender.
Rocket Mortgage

Best for: Comparing rates


Rocket Mortgage is a fully online mortgage lender that allows you to get pre-approved 
for a loan any time, day or night.

How Much Cash Can You Get On A Refinance?

The amount you earn on your refinance typically depends on your home's value. Before finding out how much you qualify for, you'll need to have your home appraised. In general, lenders will let you draw out no more than 80% of your home's value, but this can vary from lender to lender and may depend on your specific circumstances.

One big exception to the 80% rule is VA loans, which let you take out up to the full amount of your existing equity. Rocket Mortgage® allows you to take out the full amount if you have a median FICO® Score of 620 or higher. Other lenders may have different policies.

How Does A Cash-Out Refinance Work?

The cash-out refinance process is similar to the process you undergo when you buy a home. After you know you meet the requirements, you choose a lender, submit an application and documentation to underwriting, get an approval and wait for your check.

Let’s take a closer look at each of these steps.

1. Check The Requirements

Your lender sets their own requirements when it comes to deciding who qualifies for a refinance. Some of the most common cash-out refinancing requirements include:

A Credit Score Of At Least 580

To refinance, you'll usually need a credit score of at least 580. Although the qualifying score may need to be higher in certain cases to take cash out, there are exceptions.

If you're eligible for a VA loan, you can take cash out with a median FICO® Score of 580 or higher as long as there is at least 10% equity left in the home after you complete the refinance. It's worth noting that you can take out up to the full amount of your equity with a 620 qualifying credit score using a VA loan.

An FHA loan may be used to pay off debt at closing if you're an existing client of ours with a median 580 credit score. Otherwise, all other purposes for taking cash out require a 620 credit score. Conventional loans always require a 620 qualifying credit score.

A Debt-To-Income Ratio (DTI) Of Less Than 50%

Your DTI ratio is the amount of your monthly debts and payments divided by your total monthly income. For example, if you pay $1,500 in bills every month, including your mortgage, and you have a total monthly household income of $4,000, your DTI is $1,500 divided by $4,000, or about 37.5%. Although it's a good idea to target a DTI of 50% or lower, it's possible to qualify with higher debt loads on FHA or VA loans. 

Equity In Your Home

You’ll need to already have a sizable amount of equity built in your home if you want to secure a cash-out refinance. Remember that your lender won’t let you cash out 100% of the equity you have unless you qualify for a VA refinance, so take a careful look at your current equity before you commit to a cash-out refinance. Make sure that you can convert enough equity to accomplish your goals.

2. Determine How Much Cash You Need

Once you know that you meet the requirements for a cash-out refinance, determine how much money you need. If you’re planning to cash out for repairs or renovations, it’s a good idea to get a few estimates from contractors in your area so you know how much you need. If you want to refinance to consolidate debt, sit down with all of your credit card and bank statements and determine exactly how much cash you need to cover your debts.

3. Apply Through Your Lender

After you apply for a cash-out refinance, you receive a decision on whether your lender approves the refinance. Your lender might ask you for financial documents like bank statements, W-2s or pay stubs to prove your DTI ratio. After you get an approval, your lender will walk you through the next steps toward closing.

After closing, all that’s left to do is wait (typically 3 – 5 days) for your check to arrive.

The Bottom Line: Is A Cash-Out Refinance Right For You?

Whether you want to pay down debt or renovate your kitchen, a cash-out refinance can be a powerful tool and can give you the money you need to move toward your goals.

If you’re ready to get started, explore your refinance options with Rocket Mortgage today.


Next Post Previous Post