Key Takeaways
- A bank statement refinance replaces your current mortgage with a new one. It lets eligible self-employed borrowers show income through bank deposits instead of relying on tax returns for that income.
- You can refinance to change your rate or loan terms, or borrow more than you owe and receive the difference in cash.
- Your deposits affect what payment you can qualify for. Your home’s appraised value affects how much you can borrow against it. You need to meet both limits.
- If you already have a bank statement loan, compare its remaining cost with new offers. A smaller monthly payment alone does not tell you whether refinancing saves money.
A bank statement refinance replaces your current mortgage with a new loan that uses your bank deposits to calculate qualifying income. You might refinance to lower your rate or monthly payment, change your loan term, or take cash out of your home’s equity.
Your current mortgage doesn’t have to be a bank statement loan. It could be a conventional mortgage that you now want to refinance using bank statements. If you already have a bank statement loan, you could refinance into a new bank statement loan to change your rate or term, or take cash out of your equity. You may also be able to switch to a conventional mortgage if you qualify.
What is a bank statement refinance?
With a bank statement refinance, the lender reviews your deposits to calculate income for the new mortgage. This can help self-employed borrowers whose business deductions make their taxable income too low to qualify through a conventional income review.
The lender won’t count every deposit as income. It may exclude transfers or deposits that aren’t business revenue, then account for business expenses. For example, if your eligible deposits average $10,000 a month and the lender applies a 50% expense factor, it would calculate only $5,000 in monthly qualifying income. The method varies by lender, account type, and business. Our bank statement loan requirements guide covers the other factors lenders review.
Which kind of refinance do you need?
| Your goal | How the new loan works | What to check first |
|---|---|---|
| Change your rate or terms | A rate-and-term refinance pays off your current mortgage and replaces it without a substantial cash payout. | Will the new terms save enough to cover the costs? |
| Get cash from home equity | A cash-out refinance pays off your current mortgage with a larger loan and gives you the remaining cash, after costs. | Will the new payment fit, and is replacing your current rate worthwhile? |
A rate-and-term refinance can also change your repayment period, switch from an adjustable to a fixed rate, or remove a co-borrower if you qualify on your own. Changing terms can raise your monthly payment even when the rate falls.
Cash-out refinances generally have different lending limits and pricing, so ask for an offer for the type you actually want.
How does the lender decide whether you qualify for a bank statement refinance?
The lender reviews both your ability to make the new payment and the value of the home securing the loan.
- Income and monthly debts. The lender reviews your personal or business bank statements, calculates qualifying income from eligible deposits, and compares it with the proposed housing payment and your other monthly debts. Programs commonly require 12 or 24 months of statements. That choice can affect your qualifying income if deposits have changed over time. See our 12- vs. 24-month bank statement comparison.
- Home value and loan amount. An appraisal or other accepted valuation establishes the home’s value. The lender then calculates the loan-to-value ratio (LTV) by dividing the proposed loan amount by that value. A $400,000 loan on a $500,000 home, for example, has an 80% LTV.
The lender also considers your credit history, savings, property type, mortgage payment history, and time in business. Rates, credit requirements, and cash-out limits vary by program. If your deposits have declined since you got your current mortgage, calculate your likely qualifying income before assuming you can refinance.
What documents should you gather?
Start with your complete, consecutive bank statements for the period the lender requests. You will also generally need a current mortgage statement, information on any second mortgage or HELOC, property tax and insurance details, identification, and records showing your business is active. Ask the lender whether it needs explanations for large deposits or transfers. It may request a letter from your tax preparer or other business records to support its expense calculation.
Use our bank statement loan document checklist to prepare and organize your income and property documents. Add your current mortgage statement and a payoff quote when you prepare for a refinance. Your payoff quote can be higher than the balance on your statement because it includes interest through the expected payoff date and may include fees. The CFPB explains what a payoff amount includes.
Bank statement cash-out refinance: how much cash could you get?
Multiply your home’s appraised value by the lender’s maximum cash-out loan-to-value ratio (LTV). That gives you the largest potential new loan. Subtract your current mortgage payoff and any closing costs paid from that loan to estimate the cash you could receive:
Estimated cash to you = (home value × allowed LTV) − mortgage payoff − closing costs paid from the new loan
Suppose your home appraises for $700,000, your mortgage payoff is $300,000, and the lender allows 80% LTV for your loan:
| Step | Amount |
|---|---|
| $700,000 × 80%: largest loan in this example | $560,000 |
| Subtract mortgage payoff | −$300,000 |
| Cash before closing costs | $260,000 |
| Subtract $8,000 in assumed closing costs paid from the loan | −$8,000 |
| Estimated cash to you | $252,000 |
The 80% limit and $8,000 in closing costs are examples, not a promise of available terms. A lower appraised value, a lower lender LTV limit, another lien, or an income calculation that supports a smaller payment could reduce the amount of available cash you could receive from a bank statement cash-out refinance. Ask for a written estimate of the new loan amount, full monthly payment, costs, and cash you would actually receive.
If your current first mortgage has a low rate and your only goal is cash, compare a bank statement HELOC loan or home equity loan too. A second mortgage lets you keep the first loan, but you would then have two payments. Compare the combined monthly payments, total costs, and the HELOC payment after any initial interest-only period. The CFPB explains how second mortgages work.
Bank statement rate-and-term refinance: when does a lower rate pay off?
A bank statement rate-and-term refinance lets you replace your current mortgage to change its interest rate, repayment term, or both. This refinance program lets you use bank statements to qualify for the new loan. If you’re considering refinancing for a lower rate, an important question to ask yourself is whether you’ll keep the new loan long enough to see the monthly savings outweigh the cost of refinancing.
A quick way to estimate that breakeven point is:
Refinance costs ÷ monthly principal-and-interest savings = approximate months to break even
Say you owe $400,000 on a mortgage with 25 years remaining at 8.00%. You’re offered a new 25-year loan at 7.00%, with $8,000 in closing costs paid separately rather than added to the loan:
| Current loan | Proposed loan | |
|---|---|---|
| Balance used for the comparison | $400,000 | $400,000 |
| Interest rate | 8.00% | 7.00% |
| Repayment period | 25 years remaining | 25 years |
| Monthly principal and interest | About $3,087 | About $2,827 |
The new loan would lower your monthly principal-and-interest payment by about $260 ($3,087 - $2,827). At that pace, it would take about 31 months to recover the $8,000 in costs ($8,000 ÷ $260).
If you sold or refinanced again after one year, you would have saved about $3,120 on payments (12 × $260). That leaves $4,880 of the upfront cost of the refinance unrecovered through monthly payment savings.
To decide whether a bank statement rate-and-term refinance makes sense for you, also consider:
- Loan term: A new 30-year loan may lower your monthly payment partly because you’re spreading repayment over more years. Compare loans with similar terms, or check how much you would still owe when you expect to move.
- Costs added to the loan: If you finance closing costs, the new balance and monthly payment will be higher than in this example. You’ll also pay interest on those costs.
- Old-loan payoff: Check your payoff quote for any prepayment penalty and include it in the cost of refinancing. Learn when a prepayment penalty may apply.
- Full monthly payment: The example above includes principal and interest. Also account for property taxes, insurance, HOA dues, and any mortgage insurance when checking what you’ll pay each month.
When you have offers from multiple lenders, compare them using the same loan amount, a similar term, and the length of time you expect to keep the loan. Our bank statement loan rates guide explains why quotes vary. If you receive Loan Estimates, the CFPB’s comparison guide shows where to find payment and closing-cost details.
Can you refinance out of a bank statement loan?
Yes. Your current bank statement loan doesn’t determine what type of mortgage you can get next. A refinance pays off that loan and replaces it with a new one. You could qualify for another bank statement loan, a conventional loan, or, for an eligible rental property, a DSCR loan.
With a bank statement refinance, the lender uses your current bank deposits to calculate qualifying income. That may work better for you now if your deposits have grown or become more consistent since you took out your original loan, particularly if your tax returns still don’t show enough income to qualify through conventional documentation.
Before changing how you run your business or file your taxes just to qualify for a mortgage, ask your tax professional whether the change makes sense for you. Our bank statement vs. conventional loan guide compares both options.
How to compare your refinance options
- Write down your goal. Do you want cash, a lower total borrowing cost, a more predictable rate, or a shorter payoff period?
- Get your numbers. Find your balance and request a payoff quote. Estimate your home value, gather bank statements, and list other monthly debts.
- Request comparable offers. Ask about rate-and-term and cash-out separately if both interest you. Have lenders show the rate, points, fees, monthly payment, term, cash to you, and any prepayment penalty on the new loan.
- Compare the time you expect to keep the loan. Check costs now, payments during that time, and the balance you would still owe at the end. If you are taking cash out, compare a second-mortgage option too.
Next step:
- Gather the statements and business records a lender may request, then add your current mortgage statement and payoff quote.
- With those in hand, you can ask lenders for quotes based on your actual income and loan balance.
Get the printable bank statement document checklist
Frequently Asked Questions
Can I refinance a conventional mortgage into a bank statement loan?
Yes. Your current mortgage does not have to be a bank statement loan. If you qualify, the new bank statement mortgage pays off the conventional loan. Compare the new rate, payment, fees, and payoff period before switching.
Can I get cash out using bank statements?
Potentially. A cash-out bank statement refinance uses your deposits to help qualify for a larger replacement mortgage. The amount you receive depends on your home value, payoff, lender limit, closing costs, and what payment your income supports.
Do lenders count all the money deposited into my account as income?
No. A lender may remove transfers and other ineligible deposits, then account for business expenses. Ask which deposits it counted and which expense factor it used. That calculation affects the loan amount you may qualify for.
Do I need 12 or 24 months of bank statements?
Many programs ask for one of those periods. Which option is available and more useful depends on the lender and how your deposits changed over time. Ask the lender to show you the income calculation for each option it offers.
Will refinancing reset my mortgage to 30 years?
Only if you choose a new 30-year term and the lender offers it. You may be able to request a shorter term. Compare the payment and the remaining balance at the time you expect to sell or refinance, especially if your current loan has fewer than 30 years left.
Can I switch from a bank statement loan to a conventional loan later?
Yes, if you qualify under the conventional lender’s current rules. The lender will review your documented income, credit, property, and debts. Get a quote and compare its total cost with keeping your loan or taking another bank statement loan.
Is there a penalty for refinancing my current mortgage?
Check your existing loan documents and request a payoff quote. Some mortgages have a prepayment penalty if you pay them off during a specified period; others do not. Include any applicable penalty when comparing refinance offers.