BANK STATEMENT CASH-OUT REFINANCE
Essential Elements

A bank statement cash-out refinance is a type of mortgage refinance designed primarily for self-employed borrowers or those with non-traditional income sources who may have difficulty qualifying for a traditional loan based on W-2s or tax returns. Instead, lenders look at a borrower’s bank statements to determine their cash flow and ability to repay the loan. 

Monthly Statements
Lenders generally require 12-24 months of bank statements. These are usually personal and/or business bank statements showing consistent deposits that reflect cash flow.

Average Monthly Deposits
Lenders review the monthly deposits and may average them out to calculate qualifying income. Only certain types of deposits may count, typically excluding transfers or one-time large deposits.

LTV Limits
Cash-out refinances usually have an LTV limit, often around 75-85%, depending on the lender. This means you can only borrow up to a certain percentage of your home’s appraised value.

Cash-Out Amount
The loan amount is based on the value of the property minus the existing loan and any applicable LTV restrictions. The cash-out portion is the difference between the refinanced loan balance and the current mortgage balance.

Credit
Minimum credit scores of 620, with some lenders requiring higher scores for larger cash-out amounts. The interest rate will vary depending on the borrower’s credit score, with better scores qualifying for better rates.

Debt-to-Income (DTI) Ratio
Because traditional income verification is not required, lenders use a modified approach to determine DTI based on average bank statement income and existing debt obligations. Most lenders impose a DTI cap of 45 or 50%.

Loan Terms
Most lenders offer terms similar to traditional refinances, such as 15-year or 30-year fixed rates or adjustable-rate options.

Eligible Property Types
Bank statement cash-out refinances are often available for primary residences, second homes and investment properties. The eligibility and terms will vary depending on the property type, with investment properties often having stricter limits.

Closing Costs
As with other refinances, closing costs apply, which may include appraisal fees, title insurance, lender fees, and other administrative charges. Borrowers may have the option to finance the costs into the new loan balance if permitted by the lender.

A bank statement cash-out refinance is ideal for those who have built significant equity in their property and demonstrate a steady cash flow but might not have traditional income documentation like W-2s or tax returns. This is common among self-employed individuals, business owners, freelancers, or people with irregular income sources.

The high equity gives borrowers a valuable asset to leverage, while their cash flow, shown through bank statements, shows lenders they can handle the loan payments. This type of refinance gives borrowers access to funds for various needs—whether to consolidate debt, make home improvements, or invest in other ventures—without needing conventional income verification. It’s a solution that balances the flexibility of cash flow analysis with the security of home equity, though it typically comes with higher interest rates due to the reduced documentation and higher perceived risk.