Both FHA and VA loan programs offer cash-out refinance options. Learn more at the links below:
FHA Cash-Out Refinance (link to FHA Cash-Out Refinance: What You Need to Know in 2025)
VA Cash-Out Refinance (link to VA Cash-Out Refinance: What It Is and How It Works)
Remember, refinancing replaces your existing mortgage with a new one—meaning a different rate, terms, and payment. Because of this, using a cash-out refinance for debt consolidation isn’t always the best financial move. For some borrowers, it may end up costing more in the long run.
Before deciding, consider these key factors:
Equity—the difference between your home’s value and your mortgage balance—is a crucial factor since it serves as collateral for the loan.
Most lenders require you to have at least 15% to 20% equity remaining after the refinance. The more equity you have, the easier it is to qualify and the more you may be able to borrow. Higher equity can also help secure a lower interest rate, reducing risk for the lender.
Cash-out refinances are typically harder to qualify for than standard refinances because they involve a higher loan amount.
While requirements vary by lender and loan type, you’ll generally need:
A credit score of 620 or higher
A low debt-to-income (DTI) ratio—typically 43% or less after factoring in the new loan (some lenders allow higher DTIs)
Before using a cash-out refinance to consolidate debt, carefully assess the interest rate.
Compare the new rate to your current mortgage rate. If refinancing means replacing a low rate with a significantly higher one, it may not be the best choice.
Compare the new rate to the rates on your existing debts. Mortgage rates—especially on cash-out refinances—are generally lower than credit card rates, which currently average nearly 22%. However, if your refinance rate is equal to or higher than your current debts, consolidation may not be beneficial.
At FedCutRates.net, we believe that knowledge is power—especially when it comes to making important financial decisions.