How cash-out refinancing works
A mortgage payment is the balance, the monthly rate, and the term, worked through the loan formula: the payment is the balance times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the term. The monthly rate is the annual rate divided by 12. A cash-out refinance adds the cash to the balance, so the new loan is the balance plus the cash-out amount, and the new payment is the loan formula on that bigger loan at the new rate and the new term. The monthly change is the new payment minus the current payment: negative means you save. The net cash is the cash-out amount minus the closing costs. The total interest is the payment times the term, minus the loan it pays off. The break-even is the closing costs divided by the monthly saving, rounded up to whole months.
At the defaults — a $250,000 balance, current rate 8.5%, 300 months (25 years) left, cash-out $30,000, new rate 6.5%, new term 360 months (30 years), closing costs $4,000 — the new loan is $280,000, the current payment is $2,013.07 a month and the new payment is $1,769.79 a month, so the saving is $243.28 a month and $2,919.33 a year. The net cash is $26,000.00. The total interest is $353,920.31 now and $357,124.57 on the new loan, so the new loan costs $3,204.26 more interest overall, despite the lower monthly payment. The break-even is month 17: 16 months of saving is $3,892.44, which is short of the $4,000, and 17 months is $4,135.71, which covers it. The cash is 12.92 months of the old payment. The $30,000 of cash alone would cost $189.62 a month at 6.5% over 30 years, and $38,263.35 of total interest.
| Case | Current /mo | New /mo | Change /mo | Net cash | Total interest new | Break-even |
|---|
| Default ($250,000, 8.5% / 6.5%, $30,000 cash-out, $4,000 fees) | $2,013.07 | $1,769.79 | $243.28 | $26,000.00 | $357,124.57 | 17 mo |
| Cash-out $50,000 | $2,013.07 | $1,896.20 | $116.86 | $46,000.00 | $382,633.47 | 35 mo |
| Cash-out $100,000 | $2,013.07 | $2,212.24 | -$199.17 | $96,000.00 | $446,405.71 | never |
| Cash-out $10,000 | $2,013.07 | $1,643.38 | $369.69 | $6,000.00 | $331,615.67 | 11 mo |
| New rate 7.5% | $2,013.07 | $1,957.80 | $55.27 | $26,000.00 | $424,808.22 | 73 mo |
| New rate 5.5% | $2,013.07 | $1,589.81 | $423.26 | $26,000.00 | $292,331.31 | 10 mo |
| New rate 8.5% | $2,013.07 | $2,152.96 | -$139.89 | $26,000.00 | $495,064.79 | never |
| New term 20 years | $2,013.07 | $2,087.60 | -$74.54 | $26,000.00 | $221,025.15 | never |
| New term 15 years | $2,013.07 | $2,439.10 | -$426.03 | $26,000.00 | $159,038.11 | never |
| Closing costs $8,000 | $2,013.07 | $1,769.79 | $243.28 | $22,000.00 | $357,124.57 | 33 mo |
| Balance $150,000 | $1,207.84 | $1,137.72 | $70.12 | $26,000.00 | $229,580.08 | 58 mo |
| Balance $400,000 | $3,220.91 | $2,717.89 | $503.02 | $26,000.00 | $548,441.30 | 8 mo |
| Current rate 7.5% | $1,847.48 | $1,769.79 | $77.69 | $26,000.00 | $357,124.57 | 52 mo |
| Current rate 9.5% | $2,184.24 | $1,769.79 | $414.45 | $26,000.00 | $357,124.57 | 10 mo |
The worked example, line by line
Setup: balance $250,000, current rate 8.5%, remaining term 300 months (25 years), cash-out $30,000, new rate 6.5%, new term 360 months (30 years), closing costs $4,000.
Line 1 — the current payment. The monthly rate is 8.5% ÷ 12 = 0.7083% a month, and the loan formula on $250,000 over 300 months gives $2,013.07 a month.
Line 2 — the new loan and the new payment. The new loan is $250,000 + $30,000 = $280,000. The monthly rate is 6.5% ÷ 12 = 0.5417% a month, and the loan formula on $280,000 over 360 months gives $1,769.79 a month.
Line 3 — the monthly and yearly saving. $2,013.07 − $1,769.79 = $243.28 a month. The yearly saving is the unrounded monthly gap times 12, which is $2,919.33 — 3 cents less than $243.28 times 12, because the figures are computed from unrounded values and rounded only for display.
Line 4 — the net cash. $30,000 − $4,000 = $26,000.00. The closing costs are paid out of pocket here, not rolled into the loan, so they come straight off the cash you take.
Line 5 — the total interest both ways. $2,013.07 × 300 − $250,000 = $353,920.31 now, and $1,769.79 × 360 − $280,000 = $357,124.57 on the new loan, so the new loan costs $3,204.26 more interest overall. The new term restarts the clock: a 30-year new loan after 25 years remaining means 5 extra years of payments.
Line 6 — the break-even. $4,000 ÷ $243.28 = 16.44 months, rounded up to month 17: 16 months of saving is $3,892.44, which is short of the $4,000, and 17 months is $4,135.71, which covers it.
Reverse: the new rate for the new payment to equal the current payment is 7.79% (exact 7.7867); to save $100 a month it is 7.27% (exact 7.2657); to save $300 a month it is 6.19% (exact 6.1898); the most cash-out that keeps the payment from rising is $68,489.09 (a $318,489.09 loan); the term for a $1,800 a month payment at 6.5% is 342.26 months (28.52 years — a 342-month payment is $1,800.48 and a 343-month payment is $1,798.66); for a $2,000 a month payment it is 262.90 months (21.91 years — a 262-month payment is $2,003.11 and a 263-month payment is $1,999.65); for a $1,700 a month payment it is 412.27 months (34.36 years — a 412-month payment is $1,700.29 and a 413-month payment is $1,699.19); and no $1,500 a month payment exists, because the interest-only floor on the new loan is $1,516.67 a month.
Every branch, checked
Cash-out $50,000: the new loan is $300,000 and the new payment is $1,896.20, so the saving is $116.86 a month, the net cash is $46,000.00, and the break-even is month 35 (exact 34.23). The total interest on the new loan is $382,633.47, which is $28,713.15 more than now. More cash means less saving, because the extra borrowing eats the rate cut.
Cash-out $100,000: the new payment is $2,212.24, so it costs $199.17 a month MORE — the rate drop is not big enough to cover the extra borrowing. The net cash is $96,000.00, but the break-even never comes, because there is no monthly saving to pay the fees back. The total interest is $446,405.71, which is $92,485.40 more than now.
Cash-out $10,000: the new payment is $1,643.38, so the saving is $369.69 a month, the net cash is $6,000.00, and the break-even is month 11 (exact 10.82). The total interest is $331,615.67, which is $22,304.64 LESS than now — the only branch where the total interest falls, because the rate cut outweighs a small cash-out.
New rate 7.5%: the new payment is $1,957.80, so the saving is only $55.27 a month, and the break-even stretches to month 73 (exact 72.38). The total interest is $424,808.22, which is $70,887.91 more than now. A one-point rate cut barely pays when the term restarts for 30 years.
New rate 5.5%: the new payment is $1,589.81, so the saving is $423.26 a month, and the break-even is month 10 (exact 9.45). The total interest is $292,331.31, which is $61,589.00 less than now. Three points off the rate is enough to beat the longer term and the extra borrowing.
New rate 8.5%: the new payment is $2,152.96, so it costs $139.89 a month MORE, even though the rate is the same as now — the extra $30,000 of borrowing is the whole difference. The break-even never comes, and the total interest is $495,064.79.
New term 20 years: the new payment is $2,087.60, so it costs $74.54 a month MORE, and the break-even never comes — but the total interest is only $221,025.15, which is $132,895.17 less than now. The shorter term costs more monthly but far less interest.
New term 15 years: the new payment is $2,439.10, so it costs $426.03 a month MORE, and the break-even never comes — but the total interest is only $159,038.11, which is $194,882.20 less than now. The 15-year term is the cheapest loan in total, if the higher payment fits the budget.
Closing costs $8,000: the payments do not change, so the saving is still $243.28 a month, but the net cash falls to $22,000.00 and the break-even stretches to month 33 (exact 32.88). Fees come straight off the cash and the break-even, not the payment.
Balance $150,000: the current payment is $1,207.84 and the new payment is $1,137.72, so the saving is $70.12 a month and the break-even is month 58 (exact 57.05). The total interest is $212,352.19 now and $229,580.08 on the new loan. A smaller balance saves less in dollars, because the interest is a percent of the balance.
Balance $400,000: the current payment is $3,220.91 and the new payment is $2,717.89, so the saving is $503.02 a month and the break-even is month 8 (exact 7.95). The total interest is $566,272.50 now and $548,441.30 on the new loan, which is $17,831.20 less. A bigger balance saves more in dollars, and the break-even comes fast.
Current rate 7.5%: the current payment is $1,847.48, so the saving is only $77.69 a month and the break-even is month 52 (exact 51.49). If the current rate is already low, the refinance barely pays.
Current rate 9.5%: the current payment is $2,184.24, so the saving is $414.45 a month and the break-even is month 10 (exact 9.65). A high current rate is where a cash-out refinance pays best.
Reverse — the other way round: the new rate for the new payment to equal the current payment is 7.79%; to save $100 a month it is 7.27%; to save $300 a month it is 6.19%; the most cash-out that keeps the payment from rising is $68,489.09; the term for a $1,800 a month payment is 342.26 months; for a $2,000 a month payment it is 262.90 months; for a $1,700 a month payment it is 412.27 months; and no $1,500 a month payment exists, because the interest-only floor is $1,516.67 a month.
What the defaults assume
The model assumes the balance is the payoff amount on the old mortgage, both rates stay fixed, payments are monthly and on time, and the closing costs are paid out of pocket — added to the cost, not rolled into the new loan. It assumes no prepayment penalty on the old mortgage and no change to the home’s value, insurance, or taxes. It assumes the total interest is the simulated payments times the term minus the loan, using the same balance on both sides. With no cash-out the new payment is $1,580.17 and the saving is $432.90 a month — a plain refinance — the net cash is $0.00, and the break-even is month 10 (9 months saves $3,896.08, 10 months saves $4,328.98). With a 0% new rate the new payment is $777.78 a month, principal only. With no closing costs the net cash is the whole $30,000.00 and the break-even is 0 months. A cash-out refinance is not free money — the cash is borrowed at the new rate for the full new term. Rounding convention: all figures are computed from unrounded values and rounded only for display — money to cents, rates to two decimals, and whole-month break-evens use the ceiling of the unrounded ratio, so a figure worked out from the rounded numbers can differ by a few cents from the figure shown.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| New loan | balance + cash-out | $280,000.00. |
| Current payment | loan formula on the balance, current rate, remaining months | $2,013.07. |
| New payment | loan formula on the new loan, new rate, new term | $1,769.79. |
| Monthly saving | current payment − new payment | $243.28. |
| Yearly saving | monthly saving × 12 (from unrounded values) | $2,919.33. |
| Net cash received | cash-out amount − closing costs | $26,000.00. |
| Total interest now | current payment × remaining months − balance | $353,920.31. |
| Total interest on new loan | new payment × new term − new loan | $357,124.57. |
| Interest difference | total interest new − total interest now | $3,204.26. |
| Break-even | closing costs ÷ monthly saving, rounded up to whole months | 17 months (exact 16.44). |
| Cash as months of old payment | net cash ÷ current payment | 12.92. |
| Cash portion payment | loan formula on the cash-out alone at the new rate and term | $189.62. |
| Cash portion total interest | cash portion payment × new term − cash-out amount | $38,263.35. |
| New rate to equal current payment | the new rate that makes the new payment $2,013.07 | 7.79% (exact 7.7867). |
| New rate to save $100/mo | the new rate that makes the saving $100 a month | 7.27% (exact 7.2657). |
| New rate to save $300/mo | the new rate that makes the saving $300 a month | 6.19% (exact 6.1898). |
| Max cash-out without raising payment | the biggest cash-out whose new payment is still $2,013.07 | $68,489.09 (loan $318,489.09). |
| Term for a $1,800/mo payment | the term that makes the payment $1,800 at 6.5% | 342.26 months (28.52 years). |
| Term for a $2,000/mo payment | the term that makes the payment $2,000 at 6.5% | 262.90 months (21.91 years). |
| Term for a $1,700/mo payment | the term that makes the payment $1,700 at 6.5% | 412.27 months (34.36 years). |
| Interest-only floor | new loan × new monthly rate | $1,516.67 a month — so no $1,500 payment exists. |
| No cash-out | same model, $0 cash-out | New payment $1,580.17, saving $432.90, net cash $0.00, break-even 10 months. |
| New rate 0% | same model, new rate 0% | New payment $777.78 (principal only). |
| No closing costs | same model, $0 fees | Net cash $30,000.00, break-even 0 months. |
| Cash-out $50,000 | same model, $50,000 cash-out | Current $2,013.07, new $1,896.20, save $116.86, net $46,000.00, interest new $382,633.47, diff $28,713.15, break-even 35 months. |
| Cash-out $100,000 | same model, $100,000 cash-out | Current $2,013.07, new $2,212.24, save -$199.17, net $96,000.00, interest new $446,405.71, diff $92,485.40, break-even never. |
| Cash-out $10,000 | same model, $10,000 cash-out | Current $2,013.07, new $1,643.38, save $369.69, net $6,000.00, interest new $331,615.67, diff -$22,304.64, break-even 11 months. |
| New rate 7.5% | same model, new rate 7.5% | Current $2,013.07, new $1,957.80, save $55.27, net $26,000.00, interest new $424,808.22, diff $70,887.91, break-even 73 months. |
| New rate 5.5% | same model, new rate 5.5% | Current $2,013.07, new $1,589.81, save $423.26, net $26,000.00, interest new $292,331.31, diff -$61,589.00, break-even 10 months. |
| New rate 8.5% | same model, new rate 8.5% | Current $2,013.07, new $2,152.96, save -$139.89, net $26,000.00, interest new $495,064.79, diff $141,144.48, break-even never. |
| New term 20 years | same model, new term 240 months | Current $2,013.07, new $2,087.60, save -$74.54, net $26,000.00, interest new $221,025.15, diff -$132,895.17, break-even never. |
| New term 15 years | same model, new term 180 months | Current $2,013.07, new $2,439.10, save -$426.03, net $26,000.00, interest new $159,038.11, diff -$194,882.20, break-even never. |
| Closing costs $8,000 | same model, $8,000 fees | Current $2,013.07, new $1,769.79, save $243.28, net $22,000.00, interest new $357,124.57, diff $3,204.26, break-even 33 months. |
| Balance $150,000 | same model, $150,000 balance | Current $1,207.84, new $1,137.72, save $70.12, net $26,000.00, interest new $229,580.08, diff $17,227.89, break-even 58 months. |
| Balance $400,000 | same model, $400,000 balance | Current $3,220.91, new $2,717.89, save $503.02, net $26,000.00, interest new $548,441.30, diff -$17,831.20, break-even 8 months. |
| Current rate 7.5% | same model, current rate 7.5% | Current $1,847.48, new $1,769.79, save $77.69, net $26,000.00, interest new $357,124.57, diff $52,881.18, break-even 52 months. |
| Current rate 9.5% | same model, current rate 9.5% | Current $2,184.24, new $1,769.79, save $414.45, net $26,000.00, interest new $357,124.57, diff -$48,147.93, break-even 10 months. |
Who uses this
- The homeowner with a $250,000 balance at 8.5%: they learn the new payment is $1,769.79 against $2,013.07 now — so they know the saving is $243.28 a month and the cash is $26,000.00, and they check the month-17 break-even before signing.
- The homeowner who wants $100,000 of cash: they learn the payment RISES by $199.17 a month — so they know the rate drop does not cover that much extra borrowing, and they check the $68,489.09 maximum that keeps the payment flat before asking for more.
- The homeowner weighing a 15-year or a 20-year new term: they learn 15 years costs $2,439.10 a month but saves $194,882.20 of total interest, against $2,087.60 a month and $132,895.17 saved at 20 years — so they know the short term is the cheapest loan in total if the higher payment fits, and they check the never break-even before stretching for the low payment.
- The homeowner who needs the cash to pay for a renovation: they learn the $30,000 of cash alone costs $189.62 a month and $38,263.35 of interest over 30 years — so they know the cash is borrowed, not free, and they check the $3,204.26 of extra total interest before treating it as a windfall.
Accuracy & limitations
The math is exact for the numbers you enter: each payment is the loan formula on the balance, the rate, and the term, the net cash is the cash-out amount minus the closing costs, the total interest is the simulated payments minus the loan, and the break-even is the closing costs divided by the unrounded monthly saving, rounded up to whole months. What the model cannot do is know your real mortgage: check the payoff amount, because the balance on your statement may not include the interest accrued since it was printed, and check the new rate, because the rate you are quoted may be for a different term or a different credit tier. It assumes the closing costs are paid out of pocket and added to the cost, not rolled into the new loan; if your lender rolls them in, the new payment and the total interest are both higher than shown. It assumes no prepayment penalty on the old mortgage and no change to the home’s value, insurance, or taxes. It leaves out the time value of the money you save each month and any tax effect. For the other way to tap home equity, see cash-out refinance vs HELOC; for choosing the term, see 15-year vs 30-year mortgage.
Cite this calculatorBright Side Kit. “Cash-Out Refinance Calculator: Payment & Cash 2026” brightoolbox.com, 2026. Method: monthly rate i = annual rate ÷ 12; monthly payment P = B×i÷(1−(1+i)−n); new loan = balance + cash-out; monthly change = new payment − current payment; net cash = cash-out − closing costs (floored at $0); total interest = payment × term − loan; break-even = closing costs ÷ monthly saving, rounded up to whole months. Defaults: $250,000 balance, current 8.5% / 300 mo, $30,000 cash-out, new 6.5% / 360 mo, $4,000 fees → current $2,013.07, new $1,769.79, save $243.28/mo, $2,919.33/yr, net cash $26,000.00, total interest $353,920.31 / $357,124.57, diff +$3,204.26, break-even 16.44 → month 17, cash 12.92 months of the old payment, cash portion $189.62/mo, $38,263.35 interest. Branches: cash-out $50,000 → $1,896.20 / $116.86 / $46,000.00 / 35 mo; cash-out $100,000 → $2,212.24 / -$199.17 / $96,000.00 / never; cash-out $10,000 → $1,643.38 / $369.69 / $6,000.00 / 11 mo; new rate 7.5% → $1,957.80 / $55.27 / 73 mo; new rate 5.5% → $1,589.81 / $423.26 / 10 mo; new rate 8.5% → $2,152.96 / -$139.89 / never; new term 20 yr → $2,087.60 / -$74.54 / never; new term 15 yr → $2,439.10 / -$426.03 / never; fees $8,000 → $22,000.00 / 33 mo; balance $150,000 → $1,207.84 / $1,137.72 / $70.12 / 58 mo; balance $400,000 → $3,220.91 / $2,717.89 / $503.02 / 8 mo; current rate 7.5% → $1,847.48 / $77.69 / 52 mo; current rate 9.5% → $2,184.24 / $414.45 / 10 mo. Reverses: equal payment → new rate 7.79% (exact 7.7867); save $100/mo → 7.27% (exact 7.2657); save $300/mo → 6.19% (exact 6.1898); max cash-out → $68,489.09 (loan $318,489.09); $1,800/mo → 342.26 months (28.52 yr); $2,000/mo → 262.90 months (21.91 yr); $1,700/mo → 412.27 months (34.36 yr); no $1,500/mo payment (floor $1,516.67). Edges: no cash-out → $1,580.17 / $432.90 / $0.00 / month 10; new rate 0% → $777.78; no fees → $30,000.00 / 0 months. Bright Side Kit. "Cash-Out Refinance Calculator: Payment & Cash 2026" https://brightoolbox.com/cash-out-refinance-calculator/ Accessed October 25, 2026.
Embed this calculatorPaste this into any web page to embed the live calculator. The “Powered by Bright Side Kit” link below it must stay intact.