Cash-Out Refinance to Buy Another Property

If you want to buy a second home, vacation getaway, rental property, or even your next primary residence, one of the fastest ways to generate the down payment is through a cash-out refinance on your current home.

A cash-out refinance lets you convert your built-up home equity into cash without selling your property or tapping retirement savings. For many buyers, this is an accessible, low-cost way to acquire a new property.

But using a cash-out refinance to buy another home has unique advantages, risks, and rules you should understand before moving forward.

This guide breaks down how it works, how much you can borrow, lender requirements, and how Fincast helps you get competitive cash-out refinance terms.

Key Takeaways

✅ You can use a cash-out refinance to buy any type of property: primary, second home, or investment property.

✅ Most lenders allow up to 80% LTV for conventional cash-out refinances (can be higher for VA).

✅ Cash-out funds can be used for down payment, closing costs, renovations, or reserves.

✅ Your new mortgage payment affects your DTI, which impacts approval for your next property mortgage.

✅ Upload your Loan Estimate to Fincast — vetted lenders determine if they can offer more competitive terms so you can maximize your cash-out.

💡 Pro Tip: Before committing to a loan, upload your Loan Estimate to Fincast to see if you have a competitive deal. The platform benchmarks your current offer against offers from qualified lenders to see if a better deal is available.

Can You Use a Cash-Out Refinance to Buy Another Property?

Cash-out proceeds are treated as acceptable, documented borrower funds — no seasoning period required, allowing you to use them for:

• Down payment on another home

• Investment property purchase

• Renovations on the new property

• Required cash reserves

• Closing costs

Once your cash-out refinance closes, the money is yours.

Why Use a Cash-Out Refi to Buy a Second Property?

✔ 1. Access large amounts of money quickly

Commonly used for:

• Down payments

• Fixer-upper renovations

• Airbnb setup

• Closing costs

• Emergency reserves required by lenders

✔ 2. Lower cost of capital than other borrowing options

Compared to other loan options, cash-out refinances often provide better financing terms because you use your home as collateral, unlike personal loans, hard money loans, or credit cards, which tend to have higher rates.

Cash-out refinances generally offer:

• Lower fixed rates

• Longer repayment terms

• Stable monthly payments

✔ 3. You keep other assets intact

You don’t have to:

• Sell stocks

• Tap retirement accounts

• Use all of your cash savings

Your home equity works for you while your investments stay invested.

✔ 4. Jumpstart or expand a real estate portfolio

A cash-out refinance can help you fund:

• Your first rental

• Additional rentals

• A second home

• A vacation property

• A move-up home

How Much Cash Can You Pull Out?

Your borrowing power depends on:

• Your home value

• Your current mortgage balance

• Your loan program

• Your credit profile

• Lender LTV limits

Typical Cash-Out LTV Limits

Example Calculation

• Home value: $650,000

• Current balance: $390,000

• Max loan @80% LTV: $520,000

Cash-out amount: ~$130,000 (minus closing costs)

Enough for:

• A down payment on a rental

• or-

• A down payment on a second home or move-up home

Using a Cash-Out Refi for Different Types of Properties

1. Second Home or Vacation Property

Down payments are typically required:

• 10% down with strong credit

• 20% down is more common for higher-risk markets

• Exact requirements vary by lender.

Cash-out funds can also cover:

• Furnishings

• Repairs

• Reserves

• HOA fees

2. Investment Property (Rental)

Investment property mortgages typically require:

• 20–25% down for most loans

• 6–12 months of reserves

• Higher credit score requirements

Cash-out funds are ideal for:

• Down payment

• Rehab for rental readiness

• Emergency reserves

• Appraisal-required repairs

3. Primary Residence Move-Up Purchase

You can use a cash-out refinance to:

• Buy your next home

• Make the down payment

• Cover closing costs

• Complete repairs before moving in

This avoids the need to sell your current home first—and may allow you to convert it into a rental.

Impact on Your Debt-to-Income Ratio (DTI)

A cash-out refinance increases your:

• Mortgage balance

• Monthly payment

This affects your qualifying power for the next mortgage.

Most lenders require your DTI to stay under 43%, but the exact requirements vary by lender and loan program.

💡 Pro Tip: Paying off small debts during the cash-out refi can improve your DTI and help you qualify for the next home.

Risks of Using a Cash-Out Refinance to Buy Another Property

⚠ Bigger mortgage payment on your current home

Your monthly housing expenses increase.

⚠ Market risk

If property values drop, your equity cushion shrinks.

⚠ Higher interest rate compared to rate-and-term refinances

Cash-out loans are often priced higher.

⚠ Rental vacancies or non-paying tenants

Your rental income may fluctuate due to vacancies or challenging tenants.

⚠ Your home is the collateral

If financial trouble occurs, your primary home is at risk.

Cash-Out Refinance vs. HELOC for Buying Another Property

Choose a cash-out refinance when:

• You need $40k–$150k+

• You prefer fixed payments

• Your current rate is high or average

Choose a HELOC when:

• You have a very low first mortgage rate

• You want interest-only flexibility

• You’re borrowing a smaller amount

How Fincast Helps You Maximize Your Cash-Out Potential 🚀

Cash-out refinance pricing varies between lenders—especially when borrowing amounts that approach max LTV limits.

Fincast makes it easy to compare your offers side-by-side to choose the best deal for you:

1️⃣ Upload your Loan Estimate (no extra credit pull)

2️⃣ Fincast analyzes your rate, fees, PMI/MIP, and max cash-out potential

3️⃣ Vetted lenders evaluate your qualifications to see if they can provide a competitive offer

4️⃣ You choose the best deal with full transparency

💡 Pro Tip: Even a slightly better rate can save you money over the life of the loan. It may also mean getting a higher qualifying loan amount for the property you want to buy.

FAQs

1. Can I use cash-out refinance money as a down payment on another property?

Yes — as long as your chosen lender allows it. Always check with your lender to see if they restrict how you use the funds.

2. Will the new mortgage payment affect qualification for the second home or rental loan?

Yes — your DTI must remain within each lender’s stated limits.

3. Is the cash taxable?

No — cash-out funds are borrowed money.

4. Do lenders require a waiting period?

No, you can use the funds immediately, in most cases, but always check with your lender.

5. Can I deduct interest on a cash-out refinance used for another property?

Interest may be deductible if used for investment purposes (consult a tax professional).

Bottom Line

A cash-out refinance can be a powerful tool for buying another property—whether it’s a rental, vacation home, or your next primary residence. With the right strategy, you can unlock your home equity and support your real estate goals without draining your savings.

You’re in the strongest position when:

✅ You understand your LTV limits and borrowing power

✅ You account for DTI changes

✅ You compare multiple lender offers

✅ You upload your Loan Estimate to Fincast to confirm you’re getting competitive pricing

Pro Tips (Save These!)

💡 Keep your equity cushion healthy

📊 Compare cash-out vs. HELOC for flexibility

📈 Ensure your new property will cash flow

⚠ Consider market volatility

🚀 Use Fincast to benchmark and improve your cash-out refi terms

Action Checklist

• Estimate your home’s current value.

• Calculate max cash-out based on loan type

• Review the down payment requirements for your target property

• Request a Loan Estimate from your lender

• Upload your Loan Estimate to Fincast

• Compare options to maximize cash-out and minimize cost

• Start shopping for your second home or investment property

👉 Ready to unlock your equity to buy another property?

Upload your Loan Estimate to Fincast — and let vetted lenders compete to give you the best cash-out refinance terms.