If you’re looking to cash out some equity from your home or refinance at a lower rate, start by comparing the top cash-out refinance lenders that offer competitive rates and fast approval.
Low cost lender with quick preapprovals
Figure mortgage refinancing may allow you to get better terms on an existing mortgage or take cash out. It includes rate and term refinance, and cash-out refinancing on both conventional and jumbo loans. Loans applications are 100% online, facilitating fast closing and funding time, and can be quickly done via their website or by using its mobile app. After the lender does a soft credit pull and pre-qualifies you, you will receive a quote.
What we like
- Get pre-qualified without affecting your credit score
- Digital experience with online application and funding
- Secondary homes can be considered for refinancing
- No origination fees or late payment fees
- No prepayment penalties
- Closing costs can be financed into the loan
What we don't
- Only single family homes and townhomes are eligible
- It's not available in all states
Figure Lending LLC dba Figure. 15720 Brixham Hill Avenue, Suite 300, Charlotte, NC 28277. (888) 819-6388. NMLS ID 1717824. For licensing information go to www.nmlsconsumeraccess.org. Equal Housing Opportunity. Licensed in Alabama 22533, Alaska AK1717824, Arizona 0948458, Arkansas 114692, California: Loans are made and arranged pursuant to a Finance Lenders Law License, Licensed by the California Department of Financial Protection and Innovation under the California Finance Lenders Law (License 60DBO81967), Delaware 026994, Florida MLD1636, Georgia Residential Mortgage Licensee 61229, Idaho MBL-9625, Indiana 39933, Iowa 88893478 and 2018-0048, Kansas MC.0025537 and SL.0026703, Louisiana 1717824, Massachusetts Mortgage Lender License ML1717824, Michigan FL0021494, Mississippi 1717824, Missouri 19-2421, Montana 1717824, Nebraska 1717824, Nevada 4823, New Hampshire 22423-MB, Licensed by the N.J. Department of Banking and Insurance, New Mexico 1717824, North Carolina L-180811, North Dakota MB103310, Ohio RM.804317.000, Oklahoma ML011894, Oregon ML-5698, Pennsylvania 66882, South Dakota ML.05202, Tennessee 151185, Washington CL-1717824, West Virginia ML-36248, Wisconsin 1717824BA
Personalized loans to fit your financial situation
Axos Bank offers a pure online experience, and you can own a home without meeting a mortgage specialist in person. The bank also uses a leading technology that pre-qualifies your application and gives you an underwriting decision in approximately 10 minutes or less.
What we like
- Personalized home loans to fit your current financial situation
- Interest-only loans for lower monthly payments
- Pure online experience from start to closing
- Earn 3% cash back annual credit on mortgage payments
- Lender fee waived for customers and non-customers1
What we don't
- Cash back on loan requires an Axos checking account
- Does not offer in-person services
1Axos Bank™ will waive its lender fee ($995) or reduce its lender fee on new first lien mortgage loans under the following conditions: 1) The customer must have an existing or open a new Axos Bank™ Checking Account during the loan application process; AND 2) the new mortgage loan must be for $250,000 or more; OR 3) if the new mortgage loan is less than $250,000, Axos Bank™ will reduce its lender fee by $200 if the customer has or opens a new Axos Bank™ Checking Account during the loan application process. The customer will be responsible for all third party fees and all prepaid items. The $2,500 average savings is based on a national average for lender fees presuming a $250,000 loan amount and 1% origination fee.
Wide range of mortgage products that will fit your needs
New American Funding focuses on personalizing loans to the borrower's situation. If you're self-employed, have lower than average credit scores, or even a first-time home buyer, the lender will work with you to customize the most suitable product.
What we like
- Customized loans to meet your financial situation
- Helping underserved communities become homeowners
- Variety of loan products for lower credit score borrowers
- Consider self-employed and freelancers for a mortgage
- Complete transparency on total mortgage costs
What we don't
- No automatic quote or online approval
- Not available in New York and Hawaii
Customer centric lender with fast closing times
Academy is a direct lender who loan processesing, underwriting, and funding are handles in house. It also has flexible mortgage requirements and specialists who can guide you through out the mortgage process.
What we like
- Provides competitive rates
- Fast closing times because of in house loan processing
- Dedicated loan officer to help you from start to end
- Wide selection of loans to match your needs
- Flexible requirements to fit your financial situation
What we don't
- Not available in New York
- Application is not completely online
What are the requirements for cash-out refinancing?
There are different requirements from lenders. However, the basic requirements include:
- Proof of maintaining your original mortgage: If you are using the same lender for refinancing, you may not need to obtain these documents. However, if you are using a new lender, you will be required to provide evidence that you will continue to pay the mortgage, such as submitting bank statements that you have been servicing your loan faithfully. Also, the lender may want to look at your repayment history for the last three months.
- Equity: You need to prove that you own equity in your home. The minimum requirement for cashing out is usually 20%.
- Income: Lenders want to look at your financial status and be sure that you have consistent income. Borrowers with a stable income enjoy lower rates than those with an unstable income. The lender will look at your debt to income ratio to determine your ability to repay the loan as well as your existing monthly bills and debts. The average maximum debt to income ratio is 36%.
- Credit status: The average minimum credit score ranges between 580 to 620. Borrowers looking to refinance only may have a credit score as low as 580. On the other hand, individuals looking for cash out require a minimum credit score of 620+.
- Cash-out refinance wait period: The waiting period varies among lenders and also depends on the type of loan you’re looking to take out. If you are looking to cash out on a conventional mortgage, the average waiting period is six months from the closing date of your original loan. For government-backed mortgages, such as VA loans, you need to make at least six consecutive payments before applying for a cash-out refinance.
How does cash-out refinancing work?
Borrowers refinance the mortgage to a larger mortgage based on the home value. After paying off your existing loan with the refinance mortgage, the remaining funds are issued to you as a check. For example:
- Home value: $500,000
- Current mortgage balance: $300,000
- Cash out refinance loan: $400,000
- Maximum cash out: $400,000 – $300,000 = $100,000
In this example, the borrower has built home equity of $200,000 ($500,000 – $300,000). Borrowers need to retain at least 20% of their home equity, so the maximum cash out is $100,000. However, cash-out limits and minimum equity vary by lender.
Types of cash-out refinancing options
The three main types of cash-out refinance options include:
- Conventional cash-out refinance: This requires a minimum credit score of 620, and customers can borrow up to 80% of their home value.
- FHA cash-out refinance: This requires a minimum credit of 600, and customers can borrow up to 80% of their home value. This loan type requires borrowers to pay a mortgage insurance fee and any upfront fees depending on the lender.
- VA cash-out refinance: Eligible members can borrow up to 100% of their home value. However, most lenders prefer to cap this limitation at 90% to minimize their risks. This type of cash-out loan is available to the following individuals (based on VA eligibility criteria):
- Served 181 days of active service during peacetime
- Six years or more of service in the National Guard
- Served 90 consecutive days actively during wartime
- Spouse of a service member who lost their life in the line of duty or due to a service-related disability
- A service member with a Purple Heart Award
Choosing a suitable cash-out refinance mortgage depends on your eligibility, current mortgage, and lender.
How much does cash-out refinancing cost?
The costs for refinancing your mortgage depend on your lender, loan amount, loan to value (LTV) amount, and location. The average costs to cash out range between 3% to 5% of the total principal amount. If your lender charges a 4% fee on a loan amount of $100, 000, you will be required to pay $4,000 in refinancing costs. However, these costs can be added to the loan amount instead of paying up front.
Refinance costs do not include mortgage insurance, house insurance, and property taxes, as they are usually set up during your original loan application.
Some of the costs incurred include:
- Home appraisal fee: The lender sends an appraiser to determine your home value.
- Origination fee: Some lenders charge this fee to originate the loan.
- Refinance application fee: The fee varies by lender and location.
- Title search fee: Title search protects both the lender and borrower from fraudulent home sellers.
- Mortgage points fee: You can buy mortgage points to lower your interest rates. One mortgage point is equal to one percent of the loan amount.
- Lender’s attorney review fee: They depend on the lender and location.
Choosing the best cash-out refinance lender
Some of the factors to consider when choosing the best cash-out refinance lender include:
- Interest rates: Rates vary by lender, and it’s important to compare rates from at least three lenders. Lower interest rates can save you thousands of dollars.
- Closing costs: Although a lender may offer you a lower mortgage interest rate, you need to look at the total closing costs as this could cost you more than the lower rate in the long run. It would help if you ask your mortgage advisor about any hidden costs before proceeding with the application. Some lenders charge an origination fee that sometimes must be paid up front.
- Loan terms: Some lenders offer a variety of loan terms ranging between 10 to 30 years. A longer loan term have lower monthly payments but a higher accumulated interest. On the other hand, shorter loan terms have higher monthly payments and little accumulated interest rates.
- Lender qualifying requirements: Different lenders have specific requirements on credit scores and debt to income ratio. Some lenders require you to sign up or open a checking account before you apply for the loan.
- Application process: Although most lenders offer digital platforms to complete your application, some require you to visit in-person when submitting documents. Also, you need to consider the number of waiting days on prequalification, pre-approvals, and closing the loan.