Refinancing · Cash-out
How does a cash-out refinance work?
TL;DR: A cash-out refinance replaces your current mortgage with a larger loan and pays you the difference after required loan payoffs and closing costs. Other loans secured by the home, including the greater of the full credit limit or outstanding balance of a HELOC kept open, can reduce the cash available. It reduces your equity, which is your home's value minus what you owe. For a conventional cash-out refinance on a single-family home you live in, the new loan is generally capped at 80% of the home's value.
A cash-out refinance replaces your existing mortgage with a new, larger loan. The new loan pays off your old mortgage and any other secured loans being paid off, and the difference — minus closing costs — comes to you as cash. If no other secured loan remains, you end up with one mortgage and one monthly payment; any retained secured loan keeps its own balance and payment. Taking cash out increases the debt secured by your home and reduces your equity.
A cash-out refinance converts part of your home equity into cash and a larger debt. Compare the new balance, payment and closing costs before deciding whether the new loan fits your plans.
Here's how the whole thing works, start to finish.
What is a cash-out refinance?
Every refinance replaces your current mortgage with a new one. The difference is what the new loan is for:
| Rate-and-term refinance | Cash-out refinance | |
|---|---|---|
| New loan size | Roughly your current balance | Larger than your current balance |
| Cash to you at closing | Little or none | Yes — the amount above your old balance, minus costs |
| Your equity afterward | Roughly unchanged | Reduced by the cash you take |
| Typical goal | Change the rate or the term | Turn part of your equity into cash |
Both are conventional refinances. Athena offers both, and you do not have to take cash out to refinance. A rate-and-term refinance changes the rate or loan length; financing closing costs can still increase the balance and reduce equity.
How does the math work?
The calculation depends on your home's value, the loans secured by it, closing costs and the cap on loan-to-value (LTV), your loan balance divided by your home's value. Secured loans that remain count toward the combined borrowing limit; for a HELOC kept open, the greater of its full credit limit or outstanding balance is counted. A 1-unit principal residence is a home with one housing unit that you live in as your main home. For a conventional cash-out refinance on that property type, the maximum LTV is generally 80% of the value set by an appraisal, a professional estimate of your home's value. If an appraisal is waived, an accepted property value is used instead; waiver eligibility can require a lower borrowing limit.
A worked example assuming the current mortgage is the only loan secured by the home (hypothetical example, not an offer or a quote):
- Home's appraised value: $400,000
- Maximum new loan at 80% LTV: $400,000 × 0.80 = $320,000
- Current mortgage balance: $220,000
- Maximum cash before closing costs: $320,000 − $220,000 = $100,000
The maximum loan in this example is $320,000, including any financed closing costs. After paying off the $220,000 mortgage, $100,000 remains before closing costs; costs paid from those proceeds reduce the cash you receive. Compare the loan amount, cash proceeds and itemized costs on your Loan Estimate.
The 80% cap means you keep at least 20% equity in the home after the refinance. That equity is still yours. If you sell, any proceeds left after paying the mortgage debt and selling costs come to you. The amount depends on the sale price and what you owe at the time. Keeping equity provides a cushion if home prices fall, though it cannot prevent you from owing more than the home's value after a large decline.
What does a cash-out refinance cost?
Two cost layers exist on any refinance:
Lender costs. Athena's fee policy covers the lender's work, including underwriting, the lender's review of your finances and property. Your quoted rate also depends on debt-to-income (DTI), your monthly debt payments compared with your monthly income.
No lender fees. Zero points required.* Third-party and prepaid costs (appraisal, credit, title, recording, and interest from closing to your first payment) still apply.
Points are optional upfront charges paid to get a lower interest rate.
*Athena charges no origination, application, processing, underwriting, or rate-lock fee. The rate we quote requires no discount points; you may choose to buy your rate down for an additional charge. You'll still pay third-party and prepaid closing costs — appraisal, credit, title, recording, and interest from closing to your first payment. Your rate depends on credit, loan amount, LTV, DTI, and market conditions at lock.
Third-party and prepaid costs. These cover services from other companies and expenses paid in advance, including appraisal, credit, title, recording, tax service and prepaid interest. Your Loan Estimate itemizes the amounts for your loan.
Compare the "Total Closing Costs" line on your Loan Estimate, the standard form that lists estimated loan terms and costs. Compare the loan amount, rate and any lender credits too.
What are the requirements?
Exact criteria vary by lender and loan, but for a conventional cash-out refinance you can generally expect:
- Equity: enough that the new loan and any other secured loans that remain fit within the applicable borrowing limits (generally 80% for a conventional cash-out refinance on a 1-unit principal residence, counting the greater of the full credit limit or outstanding balance of a HELOC kept open)
- A full application: the lender reviews the information and documents required for the loan.
- Income and debt verification: lenders review your income and existing obligations to confirm the new payment fits
- A valuation: the appraised value sets the LTV calculation. If the lender waives the appraisal on an eligible loan, the property value accepted by the automated underwriting system is used instead.
- Seasoning: seasoning means a required waiting period. Two separate tests apply:
- Ownership: at least one borrower must have held title for at least six months before the new loan's disbursement date. Exceptions cover inheritance, a legal award through divorce, separation or dissolution of a domestic partnership, and qualifying delayed financing. Time held by a limited liability company (LLC) majority-owned or controlled by the borrowers, or by a revocable trust where the borrower is the primary beneficiary, may count toward the six months.
- Existing first mortgage: if it is being paid off, it must be at least 12 months old, measured from its note date to the new loan's note date. This test does not apply to subordinate liens or a co-owner buyout under a legal agreement.
When does a cash-out refinance make sense — and when doesn't it?
It tends to make sense when the cash does a job that outlasts the debt: replacing higher-cost debt with one lower-cost payment, funding a renovation that adds value to the home, or covering a large planned expense you'd otherwise finance at worse terms.
It deserves real caution when:
- You're moving credit card or other debt onto your house. Debt that was not secured by your home becomes part of a mortgage secured by it. Missing payments can put your home at risk, and new card spending can leave you with both card balances and a larger mortgage.
- The cash funds something that's gone in a year. A vacation financed over decades of mortgage payments costs far more than its price tag.
- You're close to paying off your current loan. If you have already paid down much of the balance, a new, longer loan can mean paying interest for more years, even at a lower rate.
Compare the existing loan with the proposed loan, including the balance, payment, closing costs and total interest. Those figures help you weigh the trade-off.
How is it different from a home equity loan or HELOC?
A home equity line of credit (HELOC) lets you borrow against home equity up to a credit limit, while a home equity loan pays a lump sum. When either is added alongside an existing mortgage, it is a second loan secured by the home; a cash-out refinance replaces the existing mortgage. Quick comparison, assuming the current mortgage is the only existing loan secured by the home:
| Cash-out refinance | Home equity loan / HELOC | |
|---|---|---|
| Number of loans | One (replaces your mortgage) | Two (your mortgage + a second loan) |
| Monthly payments | One | Two |
| Your existing mortgage rate | Replaced by the new loan's rate | Unchanged |
| Structure | Lump sum at closing | Lump sum (home equity loan) or a credit line (HELOC) |
The cost comparison depends on the existing mortgage and the proposed loans. A second loan can leave the existing mortgage in place while adding another balance and payment; a cash-out refinance replaces it. Athena currently offers conventional rate-and-term and cash-out refinancing, not home equity loans or HELOCs.
What about Texas?
Texas has its own constitutional rules for cash-out refinancing on a primary residence under Article XVI, Section 50(a)(6). Athena offers cash-out refinancing in Texas under those rules. You sign the final papers in person at a lender's, attorney's, or title company's office rather than online; your disclosures carry the remaining limits and timing before you commit. If your current Texas mortgage is a Section 50(a)(6) home-equity loan, refinancing without additional cash does not automatically convert it to a non-home-equity loan. Depending on what the lender offers and your eligibility, you may refinance into another home-equity loan or choose a non-home-equity conversion under Section 50(f)(2). That conversion has its own notice and timing rules and changes some borrower protections.
What's the process like?
The steps are an application, an appraisal or accepted valuation, underwriting and closing. For a covered refinance on your main home, federal law generally gives you three business days to cancel, called the right of rescission. The period runs from the last of signing the loan, receiving the required disclosures and receiving the cancellation notice; funds generally cannot be disbursed until it expires. Closing timelines vary by loan and borrower. You'll receive regular updates throughout the process.
Frequently asked questions
Does a cash-out refinance increase my mortgage balance?
Yes. The new loan covers the loans being paid off, plus the cash you take and any financed closing costs. Any secured loans that remain are separate obligations. At the same home value, equity decreases by the increase in total debt secured by the home.
Does checking my cash-out options hurt my credit?
At Athena, checking your options uses a soft credit pull and does not affect your credit score. If you continue the application, Athena requests a full credit report from one or more consumer reporting agencies. This is a hard inquiry and may affect your credit.
Consumer reporting agencies are companies that collect credit information and provide credit reports.
How much cash can I actually get?
For a conventional cash-out refinance on a 1-unit principal residence, start with 80% of the home's value, then subtract the payoff amounts of loans secured by the home, the balances of any secured loans that will remain, and closing costs. For a HELOC kept open, count the greater of its full credit limit or outstanding balance, without counting both. Your lender must confirm which loans may remain and which borrowing limits apply. The appraisal or, if it is waived, the value accepted by the automated underwriting system sets the value used in that calculation. Appraisal waivers can have lower LTV limits.
Will my monthly payment go up?
Often, yes — the loan is bigger. The payment also depends on the new rate and term, which is why the decision should be made looking at your actual numbers side by side, not a rule of thumb.
Can I use the cash for anything?
Generally yes — debt consolidation, renovations, tuition, large expenses. The better question is whether the purpose outlasts the payments. See the "when it makes sense" section above.
Do I have to take cash out to refinance with Athena?
No. A rate-and-term refinance changes your rate or loan length without taking cash out. Any costs financed into the new loan can still increase the balance and reduce equity.
What credit score do I need?
Requirements depend on the overall application — credit, income, equity, and debts are weighed together. Start an application and we'll show you the options Athena can support.
Ready to see your actual numbers? Check your cash-out options at athenamoney.co.
Related reading
Read how refinancing a mortgage works and when refinancing is worth it, or explore Athena's refinancing overview.
About this article
Written by Pete Amstutz, President and Co-Founder (NMLS ID: 2771958)
Published August 27, 2026
Updated September 28, 2026
Sources:
- Athena, refinancing overview, for product and application information.
- Athena, pricing information, for the fee policy and closing-cost context.
- Your Loan Estimate and Closing Disclosure, for your loan's costs and terms.
- Athena, licensing information, and NMLS Consumer Access, Athena company record, for lender identification and licensing.
- Athena, original article, published August 27, 2026.
- Texas Constitution, Article XVI, Section 50, for the cash-out legal reference.
- CFPB, Regulation Z, §1026.23: Right of rescission, for the cancellation-right period.
NMLS #2771910. Equal Housing Lender.