The Quick Read: In a cash-out refinance, your card minimums and personal loan payments are replaced by one larger mortgage payment. The old payments drop off your monthly budget once the balances are paid at closing. Your monthly outlay can fall, but it can also rise, and the total cost of the debt often grows because you stretch it over a long mortgage term. Program figures here are subject to lender guidelines and full file review.
What Actually Happens at Closing
The new mortgage pays off the old one first. Then it pays the cards and loans you chose. Anything left comes to you.
Here is the order in a typical file:
1. You apply and the lender pulls your credit report. It lists every card and loan, and those become your payoff candidates. 2. An appraisal sets the home’s value. That value, times the program’s leverage limit, decides how much cash is available. 3. Across the wholesale programs Lendmire places files with, the lender usually pays creditors directly from the closing proceeds. The payoff amounts show up on your Closing Disclosure. 4. You get three business days to cancel a refinance on the home you live in, and cash is generally not released until that window passes, per the federal consumer-finance regulator. 5. Paid-off cards then show zero balances.
Lendmire is a mortgage broker. It arranges these loans through wholesale lenders and does not lend itself. If you want to see which loans reach your equity, start with Lendmire’s cash-out refinance programs.
Key Terms Defined
Revolving debt: an account like a credit card, where the balance and minimum payment move month to month.
Installment debt: a loan with a fixed payment and a set end date, like a personal loan.
Debt-to-income ratio (DTI): your monthly debt payments divided by your monthly gross income. Lenders use it to judge what you can carry.
Cash-out refinance: a new, larger first mortgage that replaces your current one and hands you the extra equity.
Secured debt: a debt backed by collateral. Once you refinance, your card debt is backed by your house.
How Do Card Payments and Personal Loan Payments Change Differently?
A card payment floats and a personal loan payment is fixed, so they behave differently before and after the payoff. Both disappear from your budget, but they leave different footprints on your total cost.
| Factor | Credit card | Personal loan |
|---|---|---|
| Type | Revolving | Installment |
| Payment before | Minimum moves with balance | Same amount every month |
| End date before | None, unless you pay it down | Set payoff date |
| After payoff | Zero balance, open line | Closed, paid in full |
| Underwriting view | Payment can be excluded | Excluded if 10 or fewer payments remain |
The card keeps an open credit line after payoff. That matters, and the section on accounts below explains why. The personal loan simply ends.
How Do Lenders Treat Paid-Off Debts When You Qualify?
Paid-off debts can drop out of your ratio, which can help you qualify. The rules come from the agencies, and Lendmire’s wholesale programs follow them.
Under the Fannie Mae Selling Guide, a revolving account paid at or before closing does not need a monthly payment counted. You don’t have to close the card to get that treatment. An installment loan paid down to 10 or fewer remaining payments also doesn’t need to be counted. Fannie Mae adds a caution: paying off debt only to qualify “must be carefully evaluated,” and your history of credit use is a factor.
Installment debt with more than ten payments left stays in the ratio. Debts someone else has really been paying can be excluded, but the lender needs 12 months of canceled checks or bank statements, per Fannie Mae’s guide.
Confirm the specifics with your loan officer.
On the wholesale conventional programs, the automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, depending on reserves and score factors. Most programs start at a 620 decision score. Everything is subject to lender guidelines.
Does Your Total Monthly Payment Go Down?
Not always. It goes down only when the payments you retire are bigger than the increase in your housing payment. That is arithmetic, not a rule.
Here is the comparison to run. Add up your current mortgage payment, every card minimum you’re paying off, and every personal loan payment. Compare that sum to the new mortgage payment, which covers principal, interest, taxes and insurance on the larger balance. If the new payment is lower, your monthly outlay falls. If it’s higher, you’ve traded several payments for one bigger one.
Picture a homeowner with a mortgage, three cards and a personal loan with four years left. The cards and loan together cost more each month than the added mortgage payment. Monthly outlay falls. Now picture a homeowner with a single small card balance. Rolling it into a much larger mortgage may raise the monthly total. Same product, opposite result.
Two things drive the difference:
- Eliminated payments. Every retired minimum and loan payment is a credit on your side of the ledger.
- The longer term. Debt that would have ended in a few years now sits inside a mortgage that runs much longer. That lowers the monthly figure, but it can raise the total interest paid.
Rate changes matter too, and the new loan reprices your whole mortgage balance, not just the cash you pull out. Your lender’s Loan Estimate shows the terms, so compare the full picture.
Why a Lower Payment Can Still Cost More
A smaller monthly payment is not the same as a smaller bill. When you spread a three-year personal loan over a long mortgage term, you pay less each month for many more months.
The remaining term is the key. A personal loan with 18 months left is usually a poor candidate to roll in. You would turn a debt that is nearly finished into a long one. A card balance that would take years to pay down at minimums is a stronger candidate.
One way to offset the stretch is to add extra principal to the mortgage each month. That shortens the term and trims total interest. Whether you will actually do it is a question only you can answer.
Which Debts Are Worth Rolling In?
| Debt | Usually worth considering? | Why |
|---|---|---|
| Card with a large balance | Often | Minimums would drag on for years |
| Personal loan, many payments left | Often | Payment drops out of the ratio |
| Personal loan, 10 or fewer payments left | Rarely | Almost done, and the ratio may already exclude it |
| Small card balance | Rarely | The mortgage grows more than the payment shrinks |
| Federal student loan | Think twice | Loses repayment and forgiveness options |
Federal student loans deserve a flag. The CFPB cautions that paying them off with home equity gives up income-driven repayment and forgiveness benefits.
The Trade-Off You Can’t Skip: Secured Debt
Consolidating does not erase debt. It moves it. Card balances that were unsecured become part of a loan secured by your home.
The CFPB warns that if you can’t repay, you could lose your home to foreclosure. It also advises finding out why you went into debt. If you spend more than you earn, consolidation probably won’t help unless spending drops or income rises.
Closing costs are real too. A cash-out refinance re-prices your entire mortgage balance, so weigh the costs against what you’d save. The costs show up on your Loan Estimate and Closing Disclosure. Be wary of “no-cost” refinance offers. The costs are still there, built into the rate or the balance.
One more consequence: a cash-out refinance replaces your whole first mortgage. If your current loan has terms you like, you give them up.
What Happens to the Accounts Afterward?
Your paid-off cards usually show zero balances, and they stay open unless you close them. Fannie Mae does not require you to close them to exclude the payment.
That open credit is the risk. Paid-off cards with room to spend can tempt you to run the balances back up. Then you’d carry the mortgage and the new card debt. Decide before closing what you’ll do with the cards. Some people keep one for emergencies and store the others away.
Check your statements after closing. A payment due date can fall during the payoff window, and interest can accrue between your last statement and the payoff. Confirm each account reads zero.
Where the General Rule Breaks
- Collections and charge-offs. Under Fannie Mae’s April 2023 change, medical collections need not be paid off. Non-medical collections and non-mortgage charge-offs over $250 each, or $1,000 combined, must be paid at or before closing.
- Open 30-day charge accounts. Lenders must verify funds to cover the balance, along with closing costs and reserves, unless you paid it off before closing.
- Authorized-user cards. They aren’t automatically counted. The test is whether you’re obligated on the account.
- Seasoning. On conventional cash-out loans, the first mortgage being paid off must be at least 12 months old, note date to note date. You also need to have been on title for 6 months, with exceptions for delayed financing, inheritance and legal awards.
- Leverage. Conventional cash-out tops out at 80% LTV on a one-unit primary home. Two- to four-unit homes, second homes and investment property are capped at 75%. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and 50% ratio on a 30-year fixed, primary home, conforming balance, with its own six months of seasoning. Texas homestead loans follow a state cap, and that lane isn’t written there.
- Limited cash-out. Rate-and-term refinances allow only incidental cash back, which is too small for most card and loan payoffs.
Alternatives, Briefly
| Option | What it does | Main catch |
|---|---|---|
| Cash-out refinance | New first mortgage, pays debts | Reprices the whole loan |
| Home equity loan or HELOC | Second lien on top of your mortgage | Another payment, still secured |
| Unsecured consolidation loan | Pays cards with a personal loan | Often shorter term, higher payment |
| Keep paying as is | No new loan | Minimums may run for years |
Lendmire’s comparison of a cash-out refinance, a HELOC and a personal loan walks through that choice for card debt.
A Decision Test
Before you commit, run through this:
1. List every payment you’d retire, with its remaining term.
2. Compare the sum of the old housing payment and retired payments to the new housing payment.
3. Ask whether the monthly saving justifies the longer term.
4. Decide whether you’ll add extra principal to offset the stretch.
5. Decide what you’ll do with the open cards.
6. Check that you can carry the new mortgage if your income dips.
If step 3 is a close call, a consolidation that only trims the monthly figure slightly may not be worth the equity and the risk. Lendmire’s piece on consolidating card and personal loan debt covers the full process. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches.
Frequently Asked Questions
Do my card payments stop after a cash-out refinance?
Yes, once the lender pays the balances at closing and they show zero. The minimums are gone from your budget. The debt itself now lives inside your mortgage, so you repay it through the larger mortgage payment.
Does my personal loan payment go away?
Yes, if the loan is paid in full from the proceeds. A fixed payment with a set end date becomes part of your mortgage balance instead. If only a few payments remain, the lender may not count it in your ratio anyway.
Will my total monthly payment go down?
It depends on the arithmetic. It falls when the retired payments exceed the increase in your housing payment. It can rise when the debts are small or the new mortgage balance is much larger. Compare the sum of all old payments to the new one.
Do I have to close my cards?
No. Fannie Mae does not require you to close a paid-off revolving account to exclude its payment. Your credit-use history still matters, and keeping the lines open means you must manage the temptation to use them.
Can a cash-out refinance cover everything I owe?
Only up to what the program’s leverage limit and your appraised value allow. Collections or charge-offs above certain thresholds may need to be paid at or before closing. Your loan officer can show what your file allows, subject to lender guidelines and not a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Fannie Mae Selling Guide B3-6-07: Debts Paid Off at or Prior to Closing
3. Fannie Mae Selling Guide B3-6-05: Monthly Debt Obligations
4. CFPB
5. CFPB: consolidating credit card debt
6. Fannie Mae SEL-2023-03 announcement
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How a Cash-Out Refinance Changes Monthly Outlay on Auto and Card Debt · Cash-Out Refinance Criteria for a Lock-in Homeowner · Can a Cash-Out Refinance Pay Off an Unsecured Family Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.