Cash-out Refinance in Michigan
6 minute read
January 5, 2023


If you’re a homeowner in Michigan, the equity in your home could give you access to much-needed funds. 

The difference between your home’s assessed value and the balance on your mortgage is your home equity.

With a cash-out refinance in Michigan, eligible homeowners can use their home equity to pay for renovations, education, unexpected medical expenses, consolidate debt, or anything else they consider worthwhile. 

In this article, we’ll look at cash-out refinancing in Michigan, how it works, the difference between cash-out refinance vs. no cash-out, and how to know if it’s right for you.

Start your refinance in Michigan today.

How does a cash-out refinance work?

A cash-out refinance in Michigan is a type of home loan that allows homeowners to exchange the equity in their home for cash. 

When you refinance your mortgage, you replace your current mortgage with a new home loan for more money. The new mortgage pays off your first mortgage completely. 

Your new mortgage will be for more money once your existing mortgage is paid off. You’ll get the leftover money as a lump sum payment to spend however you want.

With a cash-out refinance, you only have one monthly payment, unlike a home equity line of credit that requires homeowners to make monthly mortgage payments AND a monthly line of credit payment.

Cash-out refinance example

If your home has a current assessed value of $200,000 and you still owe $50,000 on your mortgage, you could receive $110,000 in cash at closing.

Most cash-out refinance lenders allow homeowners to use up to 80% of the equity in their home for a cash-out refinance mortgage. It is calculated as follows:

$200,000 x 80% = $160,000

 $160,000 -$50,000 (balance) = $110,000 (cash out)

There are no limits or restrictions on how you spend the money you receive from a cash-out refinance in Michigan. You could use it to pay off credit card debt, finance home repairs, or do anything else you want.

Because a cash-out refinance uses your home as collateral, your lender could begin foreclosure proceedings if you couldn’t repay the loan. It’s critical to understand your finances before deciding on refinancing. 

Cash-out refinance rates in Michigan

If you apply for a cash-out refinance in Michigan, the cash-out refinance rates you pay are no higher than a no-cash-out refinance 

As with any loan, your interest rate is based on several factors. Income, how much money you want to borrow, and market activity all contribute to your interest rate, but your credit score plays the most significant role. 

The better your credit score (i.e., the higher your credit score), the lower the interest rate you can qualify for. 

Pro tip: Get a free copy of your credit report and check your credit score before you apply. 

Qualifying for cash-out refinancing in Michigan

While requirements can vary depending on which mortgage lender you choose, there are typically three main requirements for a cash-out refinance in Michigan

  1. Credit score
  2. Debt to income ratio
  3. Home equity

Credit score

Most cash-out refinance lenders look for a minimum cash-out refinance credit score of 620, though requirements will vary by lender. 

Debt-to-income (DTI) ratio

Lenders need to know that a borrower can repay the money they loan out. Lenders look at income and debt as part of this process. 

Most lenders look for a maximum DTI of 43%, although some may accept a DTI of up to 50%. Your debt-to-income ratio is your monthly income less what you spend paying debts. 

Home equity

Because a cash-out refinance loan uses your home equity, the more you have, the more you can potentially borrow. Most lenders require you to keep a minimum of 20% equity in your home upon closing a mortgage refinance loan.

Start your cash-out refi here

Living the good life in Michigan

Michigan is home to four of the five Great Lakes and almost 11 million people—with nearly 4 million living in the metro Detroit area alone.

The Wolverine State boasts more than 4,000 factories, including Ford and General Motors, making it a manufacturing powerhouse in the U.S. known worldwide.

But there’s so much more to Michigan. From lakeside resorts to world-class entertainment and sporting events, Michigan is experiencing a surge that means good news for homeowners. 

Why Michigan is a prime area for a cash-out refinance

Statewide, Michigan homeowners have seen the value of their homes rise consistently since 2015. The current median home price is $237,236, a 10.5% jump since last year, putting money in Michigan homeowner’s pockets.

Homeowners in Michigan build home equity when:   

  1. They make regular mortgage payments (each payment you make adds to the equity in your home) 
  2. Their home’s assessed value increases

The jump in Michigan property values means homeowners are sitting on an asset more valuable today than it was just last year. 

In other words, if your home’s assessed value was $175,000 last October, it could be worth up to 10.5%—or $18,375 more—and that’s additional equity homeowners can use with a cash-out refinance home loan. 

Should I get a cash-out refinance loan?

One of the main advantages of a cash-out-refinance loan is accessing a lump sum of cash at interest rates typically better than most personal loans or credit card options.  

As a homeowner, you might consider a cash-out refinance in the following scenarios:

  • Your home’s assessed value has increased since you took out your first mortgage
  • You qualify for a lower interest rate
  • You qualify for a lower monthly mortgage payment
  • You want to pay for a big expense, like medical, education, or renovations

Apply for cash-out refinance in Michigan

Are you thinking about ways to pay for a project, start a business, or pay off debt? A cash-out refinance could offer a lower-interest solution that’s right for you. 

Refinancing your mortgage is a significant financial decision. That’s why we’re here to help.

At AAA Banking, it’s important to us to ensure you have the information you need and that you understand your financing options.

Whether you’re buying your first house or considering refinancing your current mortgage, we’re here to help. 

Start your application or reach out to one of our licensed loan officers today.

Photo by RODNAE Productions

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