How to Get a Cash-Out Refinance: The Steps and What You'll Need

What a cash-out refinance is and how to start one

A cash-out refinance replaces your current mortgage with a new one for more than you owe, and you receive the difference in cash. If you owe $200,000 on your home and refinance for $250,000, you walk away with $50,000 minus closing costs. You're borrowing against the equity you've built in your home, and your new loan amount becomes your monthly obligation.

The process starts with contacting lenders — banks, credit unions, or mortgage brokers — to discuss your home's current value, how much equity you have, and how much cash you need. Lenders will pull your credit, order an appraisal, and review your income and debt. Most lenders can give you a rough idea of whether you may have access to within a day or two of your initial conversation.

You don't have to use your current lender, though some borrowers do because they already have a relationship there. Shopping with at least three lenders is standard practice, since rates and closing costs vary significantly.

Key Takeaways

• You'll need a recent home appraisal, proof of income (usually two recent pay stubs and tax returns), and a credit check to move forward.
• Lenders typically want you to have at least 15 to 20 percent equity in your home, though some will go lower depending on your credit and income.
• Closing costs for a cash-out refinance usually run 2 to 5 percent of the new loan amount and can be rolled into the loan or paid upfront.
• The entire process from initial contact to funding usually takes 30 to 45 days, though it can be faster if you're organized with your documents.
• You'll lock in a new interest rate, which means your monthly payment will change even if you're borrowing the same amount as before.

Documents you'll need to gather before contacting lenders

Have these ready before you call: your current mortgage statement (to show what you owe), a recent property tax assessment or appraisal if you've had one done in the last year, and your homeowners insurance policy number. Lenders will order their own appraisal, but having a recent one speeds things up.

You'll also need proof of income. Most lenders ask for your last two pay stubs and your last two years of tax returns. If you're self-employed, you may need additional documentation like profit-and-loss statements or business tax returns. If you receive income from Social Security, pensions, or investments, bring documentation for those too.

Bring a government-issued ID and be ready to provide your Social Security number for the credit check. If you've had any late payments, collections, or bankruptcies in the past seven years, have the details ready — lenders will see them anyway, and explaining them upfront helps.

How much equity you need and how much cash you can get

Most lenders require you to keep at least 15 to 20 percent equity in your home after the refinance. If your home is worth $300,000 and you owe $200,000, you have $100,000 in equity. A lender requiring 20 percent equity would let you borrow up to $240,000 (keeping $60,000 in equity), meaning you'd receive roughly $40,000 in cash before closing costs.

Some lenders will go down to 10 percent equity, but those loans typically come with higher interest rates. A few specialized lenders will refinance with as little as 5 percent equity remaining, but rates are significantly higher and closing costs are steeper. The less equity you keep, the riskier the lender considers the loan.

Your credit score, income, and debt-to-income ratio also affect how much you can borrow. A lender might approve you for $50,000 in cash based on your equity but cap you at $30,000 based on your income and existing debts. Each lender calculates this differently, which is why shopping around matters.

Comparing offers from multiple lenders

When lenders give you a quote, ask for a Loan Estimate form — this is a standardized document that shows the interest rate, monthly payment, closing costs broken down by line item, and the cash you'll receive. Compare the same information across all three lenders so you're looking at apples to apples.

Pay attention to the interest rate, the annual percentage rate (APR), and the total closing costs. A lower rate doesn't always mean the best deal if closing costs are much higher. A lender offering 6.5 percent with $8,000 in closing costs might be better than one offering 6.2 percent with $12,000 in closing costs, depending on how long you plan to keep the loan.

Ask each lender whether closing costs can be rolled into the loan (meaning you don't pay them upfront but your loan amount increases) or whether they must be paid at closing. Ask about any rate locks — how long the quoted rate is may provide, and whether there's a fee to lock it in. Some lenders lock rates for free for 30 days; others charge a fee or offer shorter locks.

The appraisal process and what happens if your home appraises low

The lender orders an appraisal, which typically costs $400 to $600 and is paid from your closing costs. An appraiser visits your home, measures it, photographs it, and compares it to recent sales of similar homes in your area. The appraisal determines how much your home is worth for lending purposes.

If the appraisal comes in lower than you expected, your available equity shrinks. If you were counting on $50,000 in cash and the appraisal is $30,000 lower than you thought, you may only may have access to for $20,000 in cash instead. You can challenge an appraisal if you believe it's wrong — provide the lender with recent comparable sales or evidence of improvements you've made — but the lender's appraiser has the final say.

If the appraisal is significantly lower and you no longer have enough equity to refinance, you can walk away. You'll lose the appraisal fee, but you won't be obligated to move forward with the loan.

Underwriting, conditions, and final approval

After you submit your documents, the loan goes to underwriting. An underwriter reviews everything — your credit, income, assets, the appraisal, and the property itself — to make sure the loan meets the lender's standards. This usually takes 5 to 10 business days.

The underwriter may ask for additional documents or clarification. Common requests include a letter explaining any late payments, proof that you paid off a collection account, or recent bank statements showing you have reserves. Respond to these requests as quickly as you can; delays here add days to the timeline.

Once underwriting is satisfied, you'll receive conditional approval, meaning the loan is approved pending a final walkthrough of the property and confirmation that nothing has changed. A few days before closing, the lender does a final check that you haven't taken out new debt or made major changes to your financial situation.

Closing: what to expect and what you'll sign

Closing usually happens at a title company, an attorney's office, or the lender's office. You'll sign the promissory note (your promise to repay the loan), the mortgage or deed of trust (the lender's claim on your home if you don't pay), and the closing disclosure (a final summary of all loan terms and costs). You'll also sign various other documents required by state law or the lender.

Bring a government-issued ID. The closing agent will walk you through each document, explain what you're signing, and answer questions. This usually takes 30 minutes to an hour. You'll receive copies of everything you sign.

At closing, you'll pay any closing costs that weren't rolled into the loan. If you rolled them in, there's nothing to pay out of pocket — the cash you receive is reduced by that amount. After you sign, the lender funds the loan, pays off your old mortgage, and deposits the remaining cash into your account, usually within one to three business days.

Frequently Asked Questions

Can I do a cash-out refinance if I'm behind on my current mortgage?

Most lenders won't refinance if you're currently behind on payments. You'll need to bring your loan current first. Some specialized lenders will refinance a loan that's 30 days late, but rates are much higher and closing costs are steeper. Contact your current lender about a loan modification or forbearance if you're struggling with payments.

What if I have a second mortgage or home equity line of credit?

A cash-out refinance replaces only your first mortgage. If you have a second mortgage or HELOC, it stays in place. The lender will factor the second mortgage into your debt-to-income calculation, which may reduce how much you can borrow. You can pay off the second mortgage with the cash you receive, but that's your choice.

How long does the whole process take?

From your first conversation with a lender to funding usually takes 30 to 45 days. If you're organized with your documents and respond quickly to underwriting requests, it can be faster. Delays typically happen when documents are missing or when the appraisal takes longer than expected.

Can I lock in a rate before I'm fully approved?

Yes, most lenders offer rate locks once you've submitted your application and initial documents. The lock is usually free for 30 to 45 days. If rates drop during that time, you can't take advantage of the lower rate. If rates rise, your rate is protected. Ask your lender about the cost and length of their rate lock.

What happens if I change my mind after I've locked in a rate?

You can back out at any time before closing without penalty. After closing, you're committed to the loan. If you're having second thoughts, talk to your lender about your concerns — sometimes they can adjust terms or offer options you hadn't considered.