Questions? team@hauseit.com +1 (888) 494-8258

Disclaimer: Estimates are meant to be illustrative and used for reference purposes only. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. No legal, tax, financial or accounting advice provided.

A cash-out refinance lets you replace your existing mortgage with a larger one and pocket the difference in cash. Instead of adding a second loan or a HELOC, you refinance the entire balance: the new lender pays off your old mortgage, issues a fresh loan for a higher amount, and wires the surplus to you at closing. Homeowners typically tap cash-out proceeds to consolidate higher-interest debt, fund renovations, or bulk up an emergency reserve. Because the new loan is secured by your home, expect full underwriting (credit, income, assets, and appraisal) and a rate that may be slightly higher than a standard “rate-and-term” refinance.

“Points” are prepaid interest you can buy at closing to lock in a lower rate for the life of the loan. One point equals 1% of the loan amount—so on a $400,000 mortgage, a single point costs $4,000. In exchange, lenders typically shave 0.125% to 0.25% off the note rate per point. Paying points makes sense only if the up-front cost is offset by monthly savings before you sell or refinance again. Keep in mind that points are separate from third-party fees (title, appraisal, recording), and they’re usually tax-deductible in the year you pay them if the loan is used to buy or improve the home—check with your tax advisor.

Refinance closing costs usually run 2%-to-4% of the loan amount, depending on loan size and market. Expect the usual suspects: lender origination or underwriting fee, appraisal, credit report, flood-zone certification, title search and insurance, recording, and any state or local mortgage taxes. You may also see escrow setup for property taxes and homeowners insurance, but that’s money you would have paid anyway. To compare lenders, look at the Loan Estimate’s “Section A & B” totals—those are the charges the lender controls or can shop for on your behalf. Everything else (government fees, prepaid interest, escrows) will be roughly the same no matter who you choose.

Break-even time is the number of months it takes for your monthly payment savings to recoup the up-front costs of the refinance. Calculate it by dividing total closing costs (including any points) by the monthly savings between your current payment and the new one. For example, if you spend $6,000 to refinance and save $200 a month, your break-even is 30 months. If you plan to keep the loan longer than that, the refinance should pencil out; sell or refinance sooner and you’ll lose money. A quick break-even check is the simplest way to screen refinance offers before digging into deeper amortization or long-term interest-savings calculations.