If you own property, a cash-out refinance could turn your equity into real, spendable capital for your next big investment. But first, you must learn to calculate your cash-out refinance options.
At ABL, we’ve been helping investors nationwide tap into their equity with fast, flexible financing. Whether you need funding for a major renovation or another acquisition, our cash-out refinance loan programs can do the job.
What Is a Cash-Out Refinance?
A cash-out refinance is when you replace an existing mortgage with a new, larger loan and pocket the difference as cash. This is different from a standard refinance, where you simply swap your old loan for a new one without pulling out any cash.
For example, let’s say you own a $500,000 property and still owe $100,000 on your mortgage. With a cash-out refinance, you could replace that $100,000 loan with a larger one—say $200,000—and keep the remaining $100,000 as cash.
How Cash-Out Refinance Loan Amounts Are Determined
The amount of cash you can borrow on a cash-out refinance depends on how much equity you have, the lender’s loan-to-value (LTV) limit, and your ability to afford the new monthly payments.
For example, ABL’s bridge loans allow LTVs of up to 65%. Meanwhile, we assess your ability to afford the new monthly payments mainly by your investment plan for flips or your debt-service coverage ratio (DSCR) for rentals.
How to Calculate How Much Cash You Can Borrow
To calculate how much cash you can borrow with a cash-out refinance, follow these steps:
1. Determine Your Current Equity
First, figure out how much equity you own by subtracting your current mortgage balance from your property’s value. For example, if the property is worth $1 million and your outstanding mortgage balance is $200,000, you own $800,000 in equity:
$1 million – $200,000 = $800,000
2. Calculate Your Maximum Loan Amount
Next, calculate your maximum loan amount based on the lender’s LTV limit. For example, a maximum LTV of 65% would allow you to borrow up to $650,000 on a $1 million property:
$1 million x 0.65 = $650,000
3. Estimate How Much Cash You Could Borrow
Finally, estimate how much cash you could borrow by subtracting your existing mortgage ($200,000) from your maximum loan amount ($650,000). In our example, this is $450,000:
$650,000 – $200,000 = $450,000
In sum, this is the full formula for how much cash you can borrow with a cash-out refinance:
Maximum Cash From Cash-Out Refinance = (Property Value x LTV) – Existing Mortgage
Keep in mind, however, that this assumes you meet all of the lender’s other loan requirements.
Cash-Out Refinance Loan Requirements
On top of having a maximum LTV, most cash-out refinance lenders set requirements for:
- Credit score. ABL’s minimum credit score requirement is 660.
- Loan size. Cash-out refinance loans can be anywhere from $75K to $50M at ABL.
- Loan term. ABL offers cash-out refinance loan terms of 12-24 months, unless you refinance directly into a 30-year DSCR rental loan.
- Property type. ABL offers cash-out refinances for single-family, multifamily, and condo properties.
- Interest rate. Cash-out refinance loans from ABL come with interest rates of 6.99-9%.
- Closing costs. These can include application, origination, and other administrative fees. ABL offers origination fees (points) of 0-2%.
- Prepayment penalties. Some lenders charge a fee for paying your loan off early. ABL doesn’t. We reward you for finishing early by letting you keep the interest savings.
- Experience level. Cash-out refinances for investment projects often require some experience. At ABL, we offer cash-out refinances for investors of all experience levels.
When to Get a Cash-Out Refinance
Now that you know how to qualify for a cash-out refinance, here’s when to consider getting one:
Your Property’s Value Has Increased
An increase in property value means you’re leaving money on the table. By getting a cash-out refinance, you can spread your equity across more investments to maximize your returns.
You Have a Clear, Profitable Use for the Funds
Only pull out equity if you have a clear plan for how you will invest the funds. For example, you could put the cash toward buying another rental property or renovating an existing one, so you can raise its value and rent.
You Can Lock In Better Loan Terms
Another reason to get a cash-out refinance is to secure better loan terms. For example, if interest rates drop, a cash-out refinance could help you lower your borrowing costs (on top of pulling out equity funds).
Common Mistakes to Avoid
Before you apply for your next cash-out refinance, here are some common pitfalls to avoid:
Overestimating Property Value
Overestimating your property’s value can lead to unrealistic expectations about how much cash you can pull out. So be conservative and hire a licensed appraiser. Your lender will likely require a professional appraisal before lending to you anyway.
To get a better sense for current property values in your market, consult your local ABL expert.
Ignoring Closing Costs
Closing costs can eat away at your cash-out refinance proceeds, especially if you refinance frequently. To minimize these costs, choose a lender with minimal fees like ABL. We have the only true zero-point program in the industry.
Overleveraging Yourself
While cash-out refinances can be a great way to leverage your equity, taking on too much debt can be risky. For example, if property values fall after you extract most of your equity, you could find yourself underwater on your loan (i.e., you owe more than the property is worth).
To avoid this, work with a reputable lender like ABL who’ll ensure the loan is in your best interest. At the end of the day, we’re your business partner. Your success is our success.
Explore Your Cash-Out Refinance Options With ABL
A cash-out refinance is a powerful tool for unlocking equity and accelerating your investment goals—if you calculate your numbers carefully and partner with the right lender.
At ABL, we specialize in helping real estate investors like you turn property value into opportunity with speed, flexibility, and transparent terms.
Ready to see how much cash you could unlock? Pre-qualify for an ABL cash-out refinance today and take the first step toward funding your next deal.