Turn home equity into cash while keeping the required mortgage payment lower during the interest-only period. See realistic California examples, compare 5-, 7-, and 10-year structures, and calculate your own numbers below — whether the cash is for a renovation, paying off debt, or anything else.
Before any terminology: here is the entire concept in one picture, using a real Bay Area example.
That's the whole idea: you replace your mortgage with a bigger one, take some of the difference in cash, and for a set number of years your required payment covers interest only — not any of the loan balance. The rest of this page explains each step, lets you run your own numbers, and covers what happens once that period ends, which is the part most other content skips.
Two separate ideas, combined into one loan:
Put together: you get the cash for your project, and the new, larger loan doesn't hit your monthly budget nearly as hard as it otherwise would, at least for the interest-only window.
This is the question most people actually have first: how much cash could I get, and what would the payment be? Enter your own numbers below — nothing here is sent anywhere, and it does not check or affect your credit.
These are estimates. The next step is a full application through Loan Factory's secure portal — it takes about 10 minutes, and Loi personally reviews every one.
Numbers make this concrete in a way description alone doesn't. Everything in the table below is a hypothetical, educational example only — not a rate quote, not an offer, and not tied to any specific loan program. Both rows use the same assumed rate on the same $1,200,000 loan amount, so the comparison is apples-to-apples. For numbers based on your own situation, use the calculator above with your own rate estimate.
| Structure | Assumed rate | Payment | How long that payment applies |
|---|---|---|---|
| 30-Year Fixed | 7.15% (hypothetical) | $8,105/mo (principal & interest) | All 360 months — the full loan term |
| 7-Year Interest-Only | 7.15% (hypothetical) | $7,150/mo (interest only) then $8,872/mo (principal & interest) | 84 months, then the remaining 276 months |
Same rate, same loan amount — the difference is entirely about what each payment does and doesn't include. The interest-only structure starts lower because it isn't paying down any principal yet; once that period ends, the payment rises above even the 30-year fixed example, since the same balance now has to be repaid over fewer remaining years.
Not case studies — just the math, using real Bay Area price points. All figures below are illustrative, computed at the same 7.15% interest-only rate used in the comparison above, so the numbers stay consistent across this page.
$1,600,000 home, $600,000 owed, $900,000 new loan → approximately $300,000 cash before closing costs. Loan-to-value: 56%. Interest-only payment: approximately $5,362/month. If that period were 5 years, the fully-amortizing payment afterward would be roughly $6,447/month.
$2,000,000 home, $700,000 owed, $1,200,000 new loan → approximately $500,000 cash before closing costs. Loan-to-value: 60%. Interest-only payment: approximately $7,150/month. If that period were 5 years, the fully-amortizing payment afterward would be roughly $8,597/month.
$2,500,000 home, $1,000,000 owed, $1,500,000 new loan → approximately $500,000 cash before closing costs. Loan-to-value: 60%. Interest-only payment: approximately $8,937/month. If that period were 5 years, the fully-amortizing payment afterward would be roughly $10,746/month.
A $1,500,000 mortgage against a $2,500,000 house is a 60% loan-to-value ratio — the loan amount divided by the home value. The lower that number, the more equity stays in the home.
You generally cannot borrow 100% of your home's value. Lenders set a maximum loan-to-value, or LTV — the new loan amount divided by the home's value — based on the property, occupancy, loan amount, your credit, your income, and the specific interest-only program. The exact maximum varies by program and isn't one universal number, which is exactly why the calculator above uses your own inputs instead of a single hard-coded percentage.
The basic math, once you know your program's maximum LTV:
Two quick examples of what LTV means in practice:
Lower LTV generally means more equity cushion for the lender and, often, more program options for you. This is also exactly the kind of number worth confirming directly rather than assuming — the calculator's LTV output is a starting point, not a program-specific maximum.
Once the cash-out amount and the payment start to feel real, the next question is usually: could I actually get approved for this? Here's what a lender actually looks at.
Maybe a job relocation is already on the calendar, or your kids finish school in a few years and you've already decided you'll move then. If you have a real, specific reason to expect you won't be in the home long-term, you may value the lower required interest-only payment more than accelerated principal reduction — keeping more cash available now, for the improvements that matter to you today. Paying down principal still builds equity and lowers what you'd eventually owe; it's a real tradeoff, not a pointless one.
Early in a career, or a few years into a new one, with real reason to expect meaningful income growth — a lower payment now, with room to grow into a bigger one later, can make real sense. This is the same logic some buyers use when purchasing with an interest-only loan, applied here to a refinance instead.
You already know the project cost. The cash-out portion of your new loan covers it. An interest-only structure can reduce the required payment compared with fully amortizing the same loan balance — worth knowing about specifically if the mailer that brought you here is about exactly this.
If "I won't be here long" is part of your thinking, it's worth knowing what the data actually shows right now, not what conventional wisdom used to say.
The old "people move every 5-7 years" idea is genuinely outdated — it reflected the mid-2000s market, when the actual figure was closer to 6.5 years. Today it's roughly double that nationally, and California homeowners are cited as staying the longest of anywhere in the country, with San Jose and Los Angeles both near the top of that list.
A cash-out refinance commonly carries a lower rate than a credit card or personal loan, and it comes as one fixed lump sum — which works well specifically because you already know what the project costs, rather than needing an open-ended credit line.
Since an interest-only structure lowers your payment compared to a standard loan, some borrowers choose to invest the difference elsewhere rather than spend it — building a separate investment account with the money they're not putting toward principal. We are not financial advisors, and this isn't a recommendation to do that — it's simply something worth knowing is an option some people consider, and a conversation to have with an actual financial advisor if it interests you, not with your loan officer.
This is the single most important question to understand before choosing this structure, and it's worth a direct, honest answer.
Some borrowers plan to sell or refinance before the interest-only period ends. But neither option is guaranteed. Your future income, credit, the home's value, interest rates, and which loan programs are available at that time will determine what options you actually have — not what's true today. If your situation and the market look similar to today, refinancing into another interest-only structure or a standard 30-year fixed loan may both be realistic paths; if not, it's worth planning for the fully-amortizing payment below as the default outcome, not the exception.
If you don't refinance at all, the loan converts to a fully-amortizing payment — meaning it starts including principal again, spread over however many years remain. This is commonly a real, noticeable increase, and it's worth knowing that number in advance rather than being surprised by it years from now.
At the same loan amount and the same rate, the interest-only payment itself does not change based on how long that period lasts. Using the same $1,200,000 example from earlier at 7.15%, the interest-only payment is $7,150/month whether the interest-only period is 5, 7, or 10 years. What changes is the payment after that period ends — a shorter interest-only period leaves more years to spread the same principal over, and a longer one leaves fewer.
| Interest-only period | Interest-only payment | Payment after it ends |
|---|---|---|
| 5 years | $7,150/mo | ≈ $8,597/mo (25 years remaining) |
| 7 years | $7,150/mo | ≈ $8,872/mo (23 years remaining) |
| 10 years | $7,150/mo | ≈ $9,412/mo (20 years remaining) |
In plain terms: a 5-year interest-only period gives you the lower payment for less time, but leaves the most time afterward to repay the balance, so the eventual increase is smaller. A 10-year period keeps the lower payment going twice as long, but the eventual increase is bigger, since there's less time left to spread the same principal across. Neither is automatically better — it depends on how long you actually plan to keep this exact loan. Knowing which number applies to your specific program, before you close, is exactly the kind of detail worth asking about directly.
| Cash-Out Refinance | HELOC | |
|---|---|---|
| How you get the money | One fixed lump sum at closing | A credit line you draw from as needed |
| Best fit | You already know the total project cost | An open-ended or phased project, costs not fully known yet |
| Your existing mortgage | Replaced entirely by the new loan | Stays in place — this is a separate, second loan |
| Rate structure | Can be fixed for the whole loan, or interest-only for a period | Usually variable, tied to your draws |
| Effect on your existing rate | Replaces it — you give up your current rate on the refinanced amount | Keeps your existing first mortgage and its rate untouched |
Neither is universally better — it depends on whether you already know your total project cost (favors cash-out refinance) or you're not sure yet and want flexibility (favors HELOC), and how much you value keeping your existing mortgage rate untouched.
If you tell Loi your home value, current mortgage balance, current rate, and how much cash you want, he can compare several possible approaches side by side — not just the one this page is about:
Sometimes keeping your existing mortgage is genuinely the better answer. If that's what the numbers show, that's what he'll tell you.
Most content on this topic leads only with the upside. Here's the honest other side:
No credit pull, no personal info required to start — see your numbers, then talk to me directly about your specific project and timeline.