What is Cash Out Refinancing in the Philippines?
Cash out refinancing is a type of home loan refinancing where you replace your existing mortgage with a new, larger loan — and receive the difference between the two amounts as cash. In the Philippines, this is one of the most powerful (and underused) financial tools available to homeowners who have built up equity in their property.
Here's a simple example: Suppose your home is currently valued at 5,000,000 pesos and your remaining loan balance is 2,000,000 pesos. You have 3,000,000 pesos in home equity. Through cash out refinancing, a bank might allow you to borrow up to 70–80% of your home's appraised value — meaning you could take out a new loan of up to 4,000,000 pesos, pay off your existing 2,000,000 peso balance, and receive up to 2,000,000 pesos in cash to use however you need.
Unlike a personal loan or credit card, cash out refinancing typically comes with much lower interest rates because your home serves as collateral. With the best refinance rates in the Philippines currently sitting at 5.99% per annum through Nook, this can be a significantly more affordable way to access large amounts of capital compared to unsecured borrowing options that often charge 15–25% or more.
How Cash Out Refinancing Works: Step by Step
Understanding the mechanics helps you decide whether this option makes sense for your situation. Here's how the process typically unfolds in the Philippines:
- Step 1 – Get your property appraised. The bank will commission an appraisal to determine your home's current market value. This figure drives everything else in the calculation.
- Step 2 – Calculate your available equity. Banks in the Philippines generally lend up to 70–80% of the appraised value (known as the Loan-to-Value ratio, or LTV). Subtract your remaining loan balance from this figure to find your maximum cash-out amount.
- Step 3 – Apply for the new loan. You submit a full mortgage application — including income documents, property papers, and identification — to the bank of your choice. Nook can submit your application to multiple banks simultaneously at no cost to you.
- Step 4 – Loan approval and disbursement. Once approved, your new loan pays off your old mortgage first. The remaining funds are released to you, typically via bank transfer or check.
- Step 5 – Start repaying the new loan. You now make monthly payments on the new, larger loan amount at the new interest rate and term.
What Can You Use the Cash For?
Philippine banks generally do not restrict how you use the funds from a cash out refinance, though some lenders may ask you to state a purpose during application. Common and financially sound uses include:
Home Renovations and Improvements
This is arguably the best use of cash out funds because renovations can increase your property's value — meaning the money you borrow may actually build more equity over time. A kitchen renovation, additional bedroom, or roof replacement can add significant resale value. Renovation loans through cash out refinancing are far cheaper than contractor financing or personal loans.
Debt Consolidation
If you're carrying high-interest debt — credit cards at 2–3% per month, or personal loans at 15–20% per annum — consolidating these into your mortgage at 5.99% per annum can dramatically reduce your monthly obligations and total interest paid. For example, consolidating 500,000 pesos in credit card debt from 2% monthly interest into a mortgage at 5.99% p.a. saves you roughly 114,000 pesos per year in interest alone.
Business Capital
Many Filipino entrepreneurs use their home equity to fund or expand a small business. Because mortgage rates are far lower than business loan rates, this can be a cost-effective source of startup or working capital — provided you have a solid plan to generate returns that exceed the cost of borrowing.
Education Expenses
Funding a child's university education abroad or a professional degree in the Philippines can require 500,000 to 2,000,000 pesos or more. A cash out refinance offers lower rates than education loans and more flexible use of funds.
Emergency Fund or Medical Expenses
Major medical procedures or family emergencies can create sudden financial pressure. Having access to your home equity through cash out refinancing provides a financial safety net — though it's worth noting this takes several weeks to process, so it's not ideal for immediate emergencies.
Cash Out Refinancing Requirements in the Philippines
While exact requirements vary by bank, here is what most Philippine lenders will ask for:
Eligibility Requirements
- Filipino citizen or qualified foreigner (with restrictions on land ownership)
- At least 21 years old at time of application, and not older than 65–70 years old at loan maturity
- Minimum gross monthly income of 40,000–50,000 pesos for employed applicants (varies by bank)
- Good credit history with no major defaults in the past 2–3 years
- Property must be fully titled and free of encumbrances (aside from the existing mortgage being refinanced)
- Existing loan must typically have been in good standing for at least 12–24 months
Documentary Requirements
- Completely filled-out application form
- Valid government-issued IDs (at least 2)
- Proof of income: latest 3 months payslips and Certificate of Employment (employed), or ITR and audited financial statements for the past 2 years (self-employed)
- Original Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT)
- Tax Declaration and latest Real Property Tax receipts
- Statement of Account from your current lender showing remaining balance
- Property photos (exterior and interior)
- Marriage Certificate (if applicable)
How Much Can You Borrow?
The maximum cash out amount is determined by your bank's Loan-to-Value (LTV) ratio policy and your home's current appraised value. Most Philippine banks offer LTV ratios of 70–80% for refinancing.
Here's a practical illustration:
- Appraised property value: 6,000,000 pesos
- Maximum loan at 80% LTV: 4,800,000 pesos
- Current remaining mortgage balance: 2,500,000 pesos
- Maximum cash out amount: 2,300,000 pesos
However, your actual loan approval will also depend on your income. Banks typically require that your monthly mortgage payment not exceed 35–40% of your gross monthly income. Use our home loan refinance calculator to estimate what your new monthly payment would look like before applying.
Cash Out vs. Rate-and-Term Refinancing: What's the Difference?
It's important to understand that not all refinancing involves taking out cash. Rate-and-term refinancing simply replaces your existing loan with a new one at a better interest rate or different term — your loan balance stays roughly the same, and the goal is purely to lower your monthly payment or total interest paid.
Cash out refinancing, on the other hand, intentionally increases your loan balance in exchange for a lump sum of cash. This means your monthly payment will likely be higher than it was before (even if your rate improves), because you're now repaying a larger principal amount.
If your primary goal is to reduce your monthly payment or overall cost of borrowing, reviewing current home loan interest rates in the Philippines and pursuing a rate-and-term refinance may be more appropriate. Cash out refinancing makes the most sense when you have a specific capital need and home equity is your most affordable borrowing option.
Costs and Fees to Expect
Cash out refinancing involves several one-time costs that you should factor into your decision:
- Appraisal fee: 3,500–8,000 pesos depending on property size and location
- Documentary stamp tax (DST): 1.5% of the loan amount (a significant cost on large loans)
- Mortgage registration fee: Approximately 0.25–0.5% of the loan amount
- Notarial and legal fees: 5,000–15,000 pesos
- Processing fee: 5,000–10,000 pesos (some banks waive this)
- Prepayment penalty from your existing lender: Typically 1–3% of the outstanding balance if you're within the lock-in period
On a 3,000,000 peso loan, total closing costs could range from 60,000 to 120,000 pesos or more. Make sure the financial benefit of accessing cash at a lower rate outweighs these upfront costs.
Is Cash Out Refinancing Right for You?
Cash out refinancing is a powerful tool — but it's not appropriate for every situation. It's likely a good fit if:
- You have significant equity in your home (at least 30–40% of current market value)
- Your current interest rate is at or below market rates, so you're not giving up a great deal on your mortgage
- You have a clear, productive purpose for the funds (not lifestyle spending)
- Your income is stable enough to comfortably service the larger loan
- You plan to stay in the property long enough to recoup the transaction costs
It may not be the right choice if you're close to paying off your existing mortgage (as extending the term resets your amortization), if you're uncertain about your income stability, or if you'd be borrowing to fund discretionary spending without a clear repayment strategy.
Remember: your home is the collateral. Defaulting on a cash out refinance puts your property at risk of foreclosure. Always borrow responsibly and within your means.
How Nook Helps with Cash Out Refinancing
Nook is the Philippines' first digital mortgage broker, and our service is completely free to borrowers. We work with multiple Philippine banks — including BDO, BPI, Metrobank, Security Bank, RCBC, UnionBank, Chinabank, and more — to find you the best refinancing deal, whether that's a straight rate-and-term refinance or a cash out refinance.
Instead of visiting multiple bank branches and submitting separate applications, you submit one application through Nook and we handle the rest. Our mortgage specialists will assess your equity position, help you understand how much cash you can access, and present you with competing offers so you can choose the deal that best suits your needs. With rates starting at 5.99% per annum, there's a good chance we can save you money even as you access your home equity.