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MONEY GUIDE

How to Calculate Cash-Out Refinance — Step by Step

The example is a $250,000 balance at 8.5% with 25 years left, refinanced to 6.5% over 30 years with $30,000 of cash out and $4,000 of fees — current payment $2,013.07, new payment $1,769.79, saving $243.28 a month, net cash $26,000.00, break-even month 17. Calculating a cash-out refinance is six steps, and this guide walks through them.

The formula, in one paragraph

A cash out refinance is six steps. A mortgage payment is the balance, the monthly rate, and the term: see the formula in the box below. The new loan is the balance plus the cash you take out. The monthly change is the new payment minus the current payment, the net cash is the cash out amount minus the closing costs, and the break even is the closing costs divided by the monthly saving, rounded up.

Step 1: Find your current payment

Start with the mortgage you have. The example uses $250,000 at 8.5% with 300 months left. The loan formula gives $2,013.07 a month.

Step 2: Add the cash and get the new quote

Add the cash to the balance: $250,000 plus $30,000 is a $280,000 new loan. The example uses 6.5% over 360 months, with $4,000 of closing costs. The loan formula gives $1,769.79 a month.

Step 3: Work out the monthly change

Subtract the current payment from the new payment: $1,769.79 minus $2,013.07 is minus $243.28 a month. The yearly saving is the unrounded gap times 12: $2,919.33 a year.

Step 4: Work out the net cash

Subtract the closing costs from the cash out amount: $30,000 minus $4,000 is $26,000.00. That is 12.92 months of the old $2,013.07 payment. With $8,000 of fees the net cash is $22,000.00.

Step 5: Compare the total interest both ways

The total interest is the payment times the term, minus the loan. Here it is $353,920.31 now and $357,124.57 on the new loan, so the new loan costs $3,204.26 more interest overall.

Step 6: Find the break even month

Divide the closing costs by the monthly saving, and round up: $4,000 divided by $243.28 is 16.44 months, rounded up to month 17. Sixteen months of saving is $3,892.44, and 17 months is $4,135.71. With $0 fees or no saving, there is no break even.

Working backwards

The formula also runs backwards. For the new payment to equal the current $2,013.07, the new rate would need to be 7.79% (exact 7.7867). To save $100 a month it would need to be 7.27% (exact 7.2657), and to save $300 a month 6.19% (exact 6.1898). At 6.5%, the term for a $1,800 a month payment is 342.26 months, for $2,000 it is 262.90 months, and for $1,700 it is 412.27 months. No $1,500 payment exists: the interest only floor is $1,516.67 a month.

When the cash out is too big

Take $100,000 out and the new payment is $2,212.24 a month, $199.17 a month MORE than now. The break even never comes. The most cash you can take without raising the payment is $68,489.09 at 6.5% over 30 years, a $318,489.09 loan.

The 15 year nuance

At a 15 year new term the new payment is $2,439.10 a month, $426.03 a month MORE than now. But the total interest is only $159,038.11, $194,882.20 less than the current loan. The short term is the cheapest loan in total, if the higher payment fits.

What NOT to do

Do not judge by the monthly payment alone: a 20 year term costs more a month but saves $132,895.17 of interest. Do not treat the cash as free money: the $30,000 alone costs $189.62 a month and $38,263.35 of interest.

Monthly payment = balance × monthly rate ÷ (1 − (1 + monthly rate)−term), monthly rate = annual rate ÷ 12; new loan = balance + cash out amount; monthly change = new payment − current payment; net cash = cash out amount − closing costs; total interest = payment × term − loan; break even = closing costs ÷ monthly saving, rounded up to whole months

That box is the whole formula.

Worked example: the $250,000 refinance

Step 1: $250,000 at 8.5% over 300 months = $2,013.07.
Step 2: $280,000 at 6.5% over 360 months = $1,769.79.
Step 3: $243.28 a month, $2,919.33 a year.
Step 4: $26,000.00 of net cash.
Step 5: $353,920.31 vs $357,124.57.
Step 6: month 17.

Answer: $2,013.07 now, $1,769.79 new, $243.28 a month saved, $26,000.00 cash, month 17.

Rounding convention: totals are computed from unrounded values, so rounded parts may differ by a cent from their rounded sum.

Cite this guideBright Side Kit. “How to Calculate Cash-Out Refinance — Step by Step.” Method: monthly payment = balance × monthly rate ÷ (1 − (1 + monthly rate)−term); net cash = cash out − closing costs; total interest = payment × term − loan; break even = closing costs ÷ monthly saving, rounded up. Example: $250,000 / 8.5% / 300 mo → $2,013.07; $30,000 cash out at 6.5% / 360 mo → $1,769.79, $26,000.00, month 17. Bright Side Kit. "How to Calculate Cash-Out Refinance — Step by Step." https://brightoolbox.com/guides/how-to-calculate-cash-out-refinance/ Accessed October 25, 2026.
Planning estimate, not professional advice: check the payoff amount, the new rate, and the fees with your lender before you rely on them.

Frequently asked questions

How do I calculate a cash-out refinance?

Work out both payments, subtract, then subtract the fees. On a $250,000 balance at 8.5% with 300 months left the current payment is $2,013.07, and taking $30,000 out at 6.5% over 360 months the new payment is $1,769.79, so the saving is $243.28 a month. The net cash is $26,000.00 after $4,000 of fees, the total interest is $353,920.31 now and $357,124.57 on the new loan, and the break-even is month 17.

What is the cash-out refinance formula?

Two loan payments and two subtractions. The monthly payment is the balance times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the term, with the monthly rate the annual rate divided by 12. The new loan is the balance plus the cash-out amount. The monthly change is the new payment minus the current payment, the net cash is the cash-out amount minus the closing costs, and the total interest is the payment times the term minus the loan.

How long until a cash-out refinance pays for itself?

Month 17 on the example. The $4,000 of closing costs divided by the $243.28 a month saving is 16.44 months, rounded up to 17: 16 months of saving is $3,892.44 and 17 months is $4,135.71. With $8,000 of fees the break-even is month 33, and with no fees there is no break-even at all.

Can a cash-out refinance cost more a month and still save money?

Yes. At a 15-year new term the new payment is $2,439.10, which is $426.03 a month MORE than the current $2,013.07, but the total interest on the new loan is only $159,038.11, so it costs $194,882.20 less interest than the current loan. The short term is the cheapest loan in total, if the higher payment fits the budget.

How much cash can I take out without raising my payment?

$68,489.09 at 6.5% over 30 years. That is a $318,489.09 loan, the biggest loan whose payment is still $2,013.07 a month. Take $100,000 out and the payment rises by $199.17 a month, to $2,212.24, and the break-even never comes.

Related calculators

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