# Refinance proceeds & equity gap

Canonical: https://chicagocommercialfunding.com/tools/refinance-proceeds/

Estimate cash available after loan costs and the existing payoff.

## Model inputs and hypothetical defaults

- Refinance value ($): 3000000
- Maximum LTV (%): 65
- Existing loan payoff ($): 2000000
- Refinance costs (% of new loan): 2

## How the model works

Net proceeds = value × LTV × (1 − financing cost %) − existing payoff.

## Worked illustration

A $1.95 million refinance with 2% costs and a $2 million payoff produces a $89,000 equity shortfall before reserves.

## Reconcile the payoff and all deductions

Enter the amount required to retire the existing obligation, rather than an old statement balance. Confirm accrued interest, prepayment treatment, release requirements and other payoff components with the actual documents and closing team. The percentage cost input represents the costs you choose to include on the new gross loan; a fixed reserve or a charge based on the old loan requires a separate line outside this simplified model.

A positive result is cash before omitted deductions and ownership decisions. It is not necessarily available for immediate distribution. Required repairs, operating cash, lender holdbacks, taxes and partnership restrictions can retain proceeds within the transaction or entity. Document each item before treating a refinance as cash-out.

## A value-based ceiling can overstate proceeds

This tool deliberately isolates LTV. It does not calculate DSCR, debt yield or program eligibility. Run the maximum-loan-sizing model using the proposed financing terms and lender-adjusted cash flow. If that result is lower than the value-based loan, substitute the lower executable financing in a complete closing model.

Test a lower valuation and higher costs separately, then together. A negative result identifies new cash needed under these assumptions; it does not disappear because the lender is willing to refinance some of the debt. If equity is unavailable, examine a smaller payoff negotiated with all necessary parties, a sale, new capital or a different plan. None of those outcomes is assumed by this calculator.

## Limitations

This tool uses only value/LTV sizing. Run the maximum-loan tool to consider cash-flow constraints.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf)
- [Understand cash-out constraints](https://chicagocommercialfunding.com/guides/commercial-cash-out-refinancing-and-lender-constraints/)
- [Build the complete closing cash schedule](https://chicagocommercialfunding.com/guides/building-a-sources-and-uses-schedule-that-balances/)