Best Cash-Out Refinance Lenders

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Contributor, Benzinga
October 27, 2023

If you’ve built up equity in your home, you can borrow against it with a cash-out refinance. How do you decide on the best option? Find out in this guide to the best cash-out refinance lenders

Best Cash-Out Refinance Lenders

Best Cash-Out Refinance Lenders

To find the best mortgage rates, contact multiple lenders. Here are Benzinga’s top picks. 

1. Best for Bank Statement Loans: Angel Oak Mortgage Solutions

Angel Oak Mortgage Solutions is a full-service mortgage lender offering traditional and portfolio Non-QM mortgage loans. Angel Oak is licensed in 45 states and offers competitive mortgage rates and quick closing times. 

Angel Oak Mortgage Solutions offers a wide range of mortgage solutions for various needs. Whether you are looking to purchase a home, cash-out on your current property, or refinance at a different rate, they have options for you.

With loan amounts available up to $3.5 million, they can support you in financing properties of different values. They cater to primary residences, second homes, and investment properties, and accommodate various types of properties such as single-family homes, townhomes, and condos.

As an added convenience, they offer options for self-employed borrowers and real estate investors who may not have tax returns readily available. They also provide opportunities for those with 1099 income and offer government loan products like FHA, USDA, and VA loans.

With competitive rates on conventional purchase and refinance, Angel Oak Mortgage Solutions ensures that you have options to suit your financial goals.

Pros

  • Considers unique borrower situations
  • Quick loan approval process
  • Offers competitive interest rates

Cons

  • Stricter qualification requirements
  • Higher interest rates and fees 

2. Best for Service: Rocket Mortgage® by Quicken Loans®

Rocket Mortgage® by Quicken Loans® offers a user-friendly online platform that makes applying for a refinance a breeze. You can also access your application on-the-go using the Rocket Mortgage® app. 

It offers a robust learning center so you can learn more about the refinancing process, and the platform accesses your financial preferences and goals to match you with the best loan for your needs. 

Quicken Loans has award-winning, easy-to-access customer service. You can talk to loan experts by phone or chat whenever you have a question. It offers cash-out refinances, rate and term refinances and refinances for investment properties. 

Pros

  • Apply online through their website
  • Faster loan processing times
  • Variety of mortgage options

Cons

  • Lack of personal interaction
  • Inability to negotiate terms

3. Best for Veterans: Veterans United

Veterans United specializes in VA loans and refinances. It ensures it meets the needs of veterans and service members by having advisors from every military branch. It also offers around-the-clock customer care so you can reach them if you’re overseas. 

Veterans United’s refinance offerings include Interest Rate Reduction Refinance Loans (IRRRLs), which help you take advantage of lower interest rates, and cash-out refinances. You must be a qualified service member, veteran or surviving spouse to use a VA refinance loan. 

Pros

  • Streamlined loan application process
  • Competitive interest rates and loan terms
  • Excellent customer service

Cons

  • Funding fees
  • Limited physical locations

4. Best for Online: Reali

  • securely through Reali's website
    securely through Reali's website
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Reali offers a seamless online mortgage experience. Its platform shows you multiple options so you can choose what works best. Your online dashboard lets you know the status of your application, and you have a dedicated loan officer if you have any questions. 

Reali allows you to lock in your rate in just a few minutes. It also doesn’t charge lender fees, which can save you thousands. Reali offers cash-out and rate and term refinances.  

Pros:

  • Purchase a home without having to pay the full purchase price upfront
  • Opportunity to build equity in a property over time
  • Provides stability in terms of monthly mortgage payments

Cons

  • - Can be a long-term financial commitment, often lasting 15 to 30 years
  • Requires to meet certain eligibility criteria, such as having a good credit score and a stable income

5. Best for Traditional Bank: Bank of America

Bank of America offers the best of both worlds — a digital mortgage application along with in-person assistance from loan officers. You can view its rates online, which makes comparison shopping easier. 

It also offers a Preferred Rewards program to Bank of America banking customers that keep $20,000 or more in their accounts. If you qualify, you can save $200 or more on your origination fees. Bank of America offers FHA, VA, fixed-rate, adjustable-rate and cash-out refinances. 

Pros

  • Easily accessible for customers across the United States
  • Wide range of banking and loan solutions
  • User-friendly online banking platform and mobile app

Cons

  • Higher loan origination fees 
  • Lengthy application and approval process

What Is a Cash-Out Refinance?

With a cash-out refinance, you replace your current mortgage with a new loan. The new mortgage is for a higher amount than your existing mortgage, and you receive the difference. You can use the proceeds for anything you want. Many borrowers use cash-out refinances to:

  • Renovate their home
  • Pay for educational expenses
  • Consolidate high-interest debt

How much can you cash-out? It’s based on the equity in your home. Your equity is the difference between the value of your home and the amount you owe on your mortgage. If your home value is $300,000 and your mortgage balance is $200,000, you have $100,000 in equity in your home. 

With most cash-out refinances, you have to leave at least 15% equity in your home. With the example above, 15% equity is $45,000, so the most you could take out is $55,000 ($100,000 - $45,000 = $55,000). VA cash-out refinances are the only loans that allow you to take out all the equity in your home. 

The loan amount would be for the balance of your mortgage plus the amount you’d like in cash. You may also include a buffer to cover closing costs. 

Let’s say you wanted to do $20,000 in renovations on your home. Using the example above, you might apply for a cash-out refinance for $225,000 — $200,000 to pay off your mortgage balance, $5,000 for closing costs and $20,000 for renovations. You’d receive the $20,000 as a check a few days after closing. 

Cash-Out Refinance vs. Refinance

Of course, you don’t have to take cash-out when you refinance. You can also just refinance for a better rate and/or terms. With all refinances, you have to pay closing costs, so you want to make sure the change is worthwhile. 

A lower interest rate can save you thousands over the life of your mortgage, so if you can find a significantly lower rate, refinancing can be worthwhile. 

If you have an adjustable-rate mortgage, you can switch to a fixed-rate mortgage (and vice versa). A fixed-rate mortgage has an interest rate that never changes. An adjustable-rate mortgage has an interest rate that the lender can change. 

You can also refinance for a different mortgage term. Let’s say you have a 15-year mortgage. You decide you’d like lower payments, so you work with a lender and refinance into a 30-year mortgage. You could also switch from a longer-term mortgage into a shorter term to build equity and pay off your mortgage faster. 

Cash-Out Refinance vs. HELOC

What if you’re happy with your mortgage? Maybe you have an amazing interest rate or you’re relatively close to paying off your mortgage. A cash-out refinance might not be the right move for you. In that case, you may want to access your equity by using another financial product like a home equity line of credit (HELOC). 

A HELOC is a 2nd mortgage. Instead of a loan, a HELOC is a line of credit, which works a bit like a credit card. You have a maximum amount that you can borrow, and you can borrow as much as you need up to the maximum. As you pay off what you borrow, you may be able to borrow more. 

HELOCs have a draw period and a repayment period. You can borrow against your credit line during your draw period. You typically have to make payments, but you may have the option to make low, interest-only payments. 

After your draw period ends, you enter repayment. During this phase, you can’t borrow against your credit line, and you have to pay off your loan balance plus interest. 

Keep in mind that a HELOC is a 2nd mortgage, which means that if you stop making payments, your lender could foreclose on your home. 

Cash-Out Refinance Loan Requirements

Just like with your current mortgage, you need to meet specific requirements to be approved for a cash-out refinance. 

  • Credit score: Your credit score is a 3-digit number that gives lenders a sense of how you’ve handled credit in the past. Credit scores range from 300 to 850. A cash-out refinance typically requires a credit score of 620 or higher. 
  • Debt-to-income (DTI) ratio: Your DTI ratio looks at how your monthly debt payments, including your new mortgage payment, compare to your income. For example, if your debt payments (your mortgage, car payments, credit card minimums, personal loans) add up to $1,500 per month and your pre-tax income is $3,500 per month, you have a  43% DTI ratio. Lenders look at this to be sure you have enough income to cover your commitments. You need a DTI ratio of 50% or less to qualify for a cash-out refinance. 
  • Equity: You need to have enough equity in your home to be able to leave at least 15% equity in your home after you refinance (unless you qualify for a VA cash-out refinance, in which case you can cash out all your equity).

Getting a Cash-Out Refinance

The process of getting a cash-out refinance is similar to buying a home. It might be a bit more streamlined than when you were a first-time home buyer, but not much. 

Your 1st step is finding a lender. The best approach is to contact at least 2 to 3 lenders for a quote. Review each quote carefully, looking at the fees and interest rate. Consider the service the lender offers and how responsive it is to your questions. Choose a lender offering a competitive rate and excellent service. 

Next, you’ll complete an application. You’ll need to submit documents like recent bank statements and pay stubs. Your lender will let you know exactly what you need. Your lender may also order an appraisal to assess the value of your home. 

Once it has all the information, your lender will let you know if you’ve been approved. You’ll set a time to complete your closing documents. You’ll receive a check for your proceeds 3-5 days after closing. 

Start with our list of recommended lenders to secure a cash-out refinance loan today.

Find the Best Cash-Out Refinance Lender

Finding the best cash-out refinance lenders is important for you who are looking to access the equity in your homes. By conducting thorough research, comparing rates and fees, and reading reviews from other customers, homeowners can make an informed decision and choose a lender that offers competitive terms and a smooth refinancing process. It is essential to work with a reputable lender who understands your needs and can provide personalized assistance throughout the refinance journey. By taking the time to find the best cash-out refinance lender, you can access the funds you need while ensuring that you are receiving the best possible terms and customer service.

Frequently Asked Questions

Q

What can I use the cash from cash-out refinance for?

A

The cash obtained from a cash-out refinance can be used for multiple purposes. Some common uses include home renovations, debt consolidation, educational expenses, emergency funds, or investing in other properties. The choice is entirely up to you!

Q

How much cash can I get from a cash-out refinance?

A

The amount of cash you can receive depends on various factors such as your home’s appraised value, the loan-to-value ratio set by lenders, and any existing mortgage debts. Typically, lenders allow you to access up to 80% of your home’s value.

Q

How long does the cash out refinance process take?

A

The cash out refinance process typically takes around 30 to 45 days. However, the exact duration can vary depending on factors such as the complexity of your financial situation, property appraisal, and any additional documentation required by the lender.

Get Ready for Take Off

Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.

You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.

About Melinda Sineriz

Melinda specializes in writing about mortgages. student loans, personal loans, insurance, managing credit and debt, and credit cards.