Cash-Out Refinance FAQ:
Common Questions Answered

Typically you need at least 20% equity remaining after the cash-out — meaning you can borrow up to 80% of your home's value (LTV). FHA allows 80% LTV. VA allows up to 100%. Example: home worth $500K, existing mortgage $250K. 80% LTV = $400K new loan max. $400K - $250K = $150K cash out (minus closing costs).

No. Cash-out refinance proceeds are NOT taxable income — they are loan proceeds, not income. The IRS does not consider borrowed money as taxable income. However, mortgage interest deductibility depends on how you use the funds: interest on funds used for home improvements is deductible; interest on funds used for debt consolidation or personal expenses may not be. Consult a tax professional.

Typically 30-45 days from application to closing. Factors that can extend the timeline: appraisal delays, complex income documentation (self-employed), title issues, or high loan volume. Rush closings are possible in 2-3 weeks with some lenders for an additional fee.

Yes, with limitations. FHA cash-out refinance allows credit scores as low as 500 with sufficient equity. VA cash-out has no agency minimum (most lenders want 580+). Conventional requires 620+. Lower credit scores mean higher interest rates. Improving your credit before applying can save thousands.

Cash-out refinance replaces your entire mortgage — ideal if you need a large sum and current rates beat your existing rate. Home equity loan is a second mortgage — ideal if you have a great rate on your first mortgage and don't want to lose it. Cash-out typically has lower rates but higher closing costs. See full comparison →