RenoFi vs Cash-Out Refinance: 2027 Verdict
Cash-out refinance: replaces entire mortgage at today's rate, 80% current-LTV cap, 2-5% closing on full balance, 6-12mo seasoning. RenoFi: second lien keeps existing rate, 90% ARV (up to $750K), ~2% broker fee on reno amount only, no seasoning. Below-market first mortgage → RenoFi. At/above-market rate or small balance → refi can win.
RenoFi vs Cash-Out Refinance 2027: Keep Your Low Rate or Reset It?
A cash-out refinance sounds simple — until you realize it means re-borrowing your entire mortgage at today's rate. If you locked below market, that "simple" refi is the most expensive renovation loan on the menu. Here's the math nobody shows you.
Quick Verdict: Current rate below market → RenoFi (second lien, first mortgage untouched). Current rate at/above market, small balance, or you'd refinance anyway → cash-out refi becomes competitive. The deciding variable is always your existing rate.
Keep Your Rate. Fund the Reno Anyway.
RenoFi adds a second lien against after-renovation value — your first mortgage never moves.
Check My Borrowing Power →Head-to-Head
| Factor | Cash-Out Refi | RenoFi |
|---|---|---|
| Your existing rate | Reset to market | Untouched |
| Borrowing base | 80% of current value | 90% of ARV (post-reno) |
| Closing costs | 2-5% on FULL balance | ~2-4% on reno amount |
| Seasoning | 6-12 months typical | None once purchase records |
| Rate applies to | Everything, one payment | Reno portion only, 2 payments |
| Timeline | 30-60 days | 30-60 days |
The Math Nobody Shows You
$350K Balance at 3.25% · Home $400K · $150K Reno
Cash-out refi: new $500K mortgage at ~7% → payment jumps ~$1,150/mo. That's ~$13,800/yr more in interest — for $150K of cash.
Bonus problem: 80% LTV on $400K = $320K max — you can't even get the $150K. You're $100K+ short AND paying more.
RenoFi: first mortgage stays at 3.25%; ~$150K second lien at partner rate ≈ +$1,000-1,200/mo — with the full amount actually funded against $550K ARV.
When Cash-Out Refi Still Wins
- Your rate is already high (at/above market) — resetting costs nothing; you get one payment at one rate.
- Tiny remaining balance — e.g. $80K left: refi fees are small and rate arbitrage barely matters.
- You want one payment and simple amortization over 30 years (lower monthly, more total interest).
- Project is small — under ~$50K the RenoFi broker fee advantage thins; run both quotes.
If the refi path fits you, get competing lender quotes — spreads on cash-out pricing are wide: compare refi lenders in 2 minutes. And see every way to tap equity without refinancing.
How Much Does Your ARV Unlock?
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Get My Estimate →Frequently Asked Questions
Can I do a cash-out refi right after buying?
Usually no — 6-12 months of seasoning required by most lenders. It's one reason low-equity recent buyers end up with ARV second liens instead.
Is interest on either option tax-deductible?
Both can qualify for the mortgage interest deduction when funds substantially improve the home securing the loan. Cash-out used for non-home purposes (debt, tuition) isn't deductible — RenoFi funds must go to the renovation by design.
What if rates drop after my RenoFi loan?
You can refinance the whole stack later (first + second) if rates cooperate — most RenoFi partners have no prepayment penalty, which keeps that exit open.
RenoFi vs a HomeStyle refinance?
HomeStyle also resets the first mortgage (same rate-reset problem) — full comparison: RenoFi vs 203k vs HomeStyle.
Related Guides
RenoFi vs HELOC →
The other second-lien option
RenoFi Rates & Fees →
The true all-in cost
No-Equity Reno Loans →
All 7 options ranked
RenoFi Review →
Legit check & complaints
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Keep Your Rate. Get the Cash Anyway.
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