Cash-Out Refinance in Tennessee

How cash-out refinancing works

In a cash-out refinance, you replace your existing mortgage with a new, larger loan. The new loan pays off your current mortgage balance, and you receive the difference in cash at closing. The cash can be used for any purpose — no restrictions.

Example: Your home is worth $400,000 and your current mortgage balance is $200,000. You could refinance into a $300,000 loan and receive $100,000 in cash (minus closing costs), while your new mortgage payment is based on the $300,000 balance.

LTV limits

Lenders limit how much equity you can cash out. Maximum loan-to-value ratios for cash-out refinances:

• Conventional: 80% LTV maximum (you must retain at least 20% equity)
• FHA: 80% LTV maximum
• VA: 90% LTV maximum for eligible veterans
• Jumbo: Varies by lender; typically 70–75% LTV

Common uses for cash-out proceeds

• Home improvements: Kitchen and bath renovations, additions, HVAC replacement — improvements that may increase the home's value
• Debt consolidation: Pay off high-interest credit cards or personal loans with lower-rate mortgage debt
• Education expenses: College tuition or other educational costs
• Investment property down payment: Use equity from your primary home to fund a rental property purchase
• Emergency fund: Establish a financial cushion

Cash-out vs. HELOC vs. home equity loan

Cash-out refinancing isn't the only way to access home equity. The right choice depends on your current mortgage rate, how much you need, and how you plan to use the funds:

• Cash-out refi: Best when current rates are at or below your existing rate, or when you need a large lump sum. Replaces your entire first mortgage.
• HELOC: Best for ongoing or uncertain expenses (renovation projects, tuition). Revolving credit line; doesn't affect your first mortgage rate.
• Home equity loan: Best for a specific lump sum at a fixed rate. Second mortgage; doesn't affect your first mortgage rate.

Qualification requirements

Cash-out refinances have slightly stricter requirements than rate-and-term refinances. Conventional cash-out requires a minimum 620 credit score, though better pricing is available above 700. Income verification and a new appraisal are required. There's typically a 6-month seasoning requirement — you must have owned the home for at least 6 months before doing a cash-out refinance.