The Quick Read: A conventional cash-out refinance releases nothing above the cap. The cap limits the new loan to a percentage of your home’s value, and the equity above that line stays in the house. What reaches you is the room left under the cap after the old mortgage, any other liens and the financed costs come out. On a one-unit principal residence the cap is 80% of value, subject to lender guidelines and full file review.
Key takeaways:
- The cap limits the total new loan, not the share of your equity you can take.
- Cash released equals the maximum new loan minus payoffs and financed costs.
- A lower appraisal shrinks the cap amount, and the cash shrinks with it.
- A second dollar ceiling, the conforming loan limit, can bind before the percentage does.
- Occupancy and unit count change the cap, so the same house can release different amounts.
What “the Cap” Means
The cap is the maximum loan-to-value ratio the agencies allow on a cash-out refinance. Loan-to-value, or LTV, is the new loan divided by the home’s value. On a one-unit principal residence, both Fannie Mae’s eligibility matrix and Freddie Mac’s guide set it at 80%. That 20% cushion is the point of the rule.
People also say “the cap” when they mean a dollar ceiling. That is the conforming loan limit, which the FHFA sets each year and which varies by county. It caps loan size, not a percentage of value. The two caps are separate tests, and the smaller result wins.
| Cap | What it limits | What sets it |
|---|---|---|
| Percentage cap (LTV) | New loan as a share of value | Occupancy and unit count |
| Dollar ceiling | Total loan amount | County conforming limit |
Equity above either cap is not released on a conventional loan. Nothing in the file turns it into cash. To reach it, you reduce the request, wait for value to rise, or look at a different lane.
The Release Formula
The release formula is simple: value times the cap gives the maximum new loan. Subtract the first-mortgage payoff, any other lien that is paid off or stays in place, and the financed costs. What remains is the cash released. If that number is small or negative, there is nothing meaningful to take out.
Here is how the file runs, step by step.
1. Value. The appraised value is the base for every ratio. A lower appraisal means a lower cap amount.
2. Cap. Multiply value by the cap for your occupancy and unit count.
3. Payoff. The existing first mortgage comes out of the cap amount first.
4. Other liens. Fannie Mae applies the cap to combined LTV as well, so a second lien left in place also uses headroom. Paying off a non-purchase-money second is treated as cash-out whether or not you take extra cash, per the Selling Guide on subordinate financing.
5. Costs. Closing costs, prepaids and escrows that are rolled into the loan sit inside the loan amount. They reduce your net cash. They never raise the cap.
6. Other gates. Seasoning, credit score, ratios, the loan limit and any lender overlay can lower what you can use.
Worked Examples in Percentages
No dollar figures here, because the logic is the same at any price.
A simple case. Value is 100%. The cap is 80%. The existing mortgage is 50% of value. That leaves 30% of value of room. Financed costs, say 2% of value, come out of that, so the check is roughly 28% of value.
A second lien. Same home, same 80% cap. The first mortgage is 50% of value and a second lien is 10%. Paying off both leaves 20% of value of room before costs. Skip the payoff and the second stays in place? It still counts toward combined LTV, so the headroom shrinks the same way.
A low appraisal. You expect value at 100%, but the appraisal lands at 95%. The cap is now 76% of the original expected value. With a 50% first mortgage, the room drops from 30 points to 26. The cash fell by four points of value, and nothing in your file changed.
That is why the common belief fails. “I can borrow 80% of my value in cash” is wrong. The 80% is the total loan. Likewise “I can take out 80% of my equity” is wrong, because the cap is a share of value, and your equity is only the part of value you own.
When the Dollar Ceiling Binds First
The dollar ceiling binds when 80% of your value is more than the county conforming limit. In that case the loan you can get as a conforming file is the lower number, and the rest of the cap room goes unused.
Cash-out can also push you over the line. Say your current balance sits under the limit, but the balance plus the cash you want does not. The new loan becomes high-balance or jumbo. At that point the product lane changes. Across the wholesale programs placed through Lendmire, the jumbo lanes start at a 660 decision score, reach leverage to 90% and loans to $5,000,000, with a 50% ratio ceiling on the fixed lanes. Those are separate programs with their own review, not an extension of the conventional cap.
The limit varies by county and by year.
The Cap by Occupancy and Property Type
The cap falls as the risk rises. On a one-unit principal residence it is 80%. Two- to four-unit principal residences, second homes and one-unit investment properties drop to 75%. Manufactured housing on a principal residence is lower still, at 65% under Fannie Mae’s matrix. Occupancy decides the leverage, so a second home or a multi-unit residence releases less than a single-family home of the same value.
| Property | Typical cash-out cap |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
| Manufactured home, principal residence | 65% |
These are agency figures, and an individual lender can set a lower cap. Some lenders post tighter overlays than the agencies do.
Where the General Rule Breaks
The 80% rule has named exceptions and a few traps. These are the ones that show up in files.
Seasoning. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months. Inheritance and legal awards are exceptions, and so is a recent cash purchase handled through delayed financing. The Selling Guide’s cash-out section lays these out.
Limited cash-out versus cash-out. A limited cash-out refinance, which Lendmire’s programs call a rate-and-term refinance, pays off the loan and costs and returns only a small amount of cash. It allows higher leverage, 95% on a one-unit principal residence in the wholesale programs, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. Take more than the small allowance back, and the file becomes a true cash-out with the 80% cap. That is the dividing line. The limit for cash back was changed in the fall, and the Selling Guide’s limited cash-out section has the current wording.
Rolling in a HELOC. Many borrowers expect a HELOC payoff to count as a plain rate-and-term refinance. A non-purchase-money second paid off into a new first is cash-out.
Texas homesteads. A cash-out on a Texas homestead is capped by the state constitution at the agency figure, and it carries a fee restriction. The wholesale no-mortgage-insurance lane described below is not written there.
Delinquent taxes. Fannie Mae excludes cash-out loans that finance real estate taxes more than 60 days delinquent without an escrow account, with a narrow legal exception.
Rounding. A ratio that lands just over the cap fails the cap. A file at 80.1% is not an 80% file. The fix is a smaller loan, which means less cash.
A lane above 80%. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance and its own six months of seasoning. It is the one place a borrower can get past the standard 80% line on a conventional cash-out, and it is subject to lender guidelines and full file review.
What Shrinks the Check
Several things come out of the room under the cap before any cash reaches you.
- Payoffs. The first mortgage and any paid-off liens come first.
- Costs. Origination, appraisal, title and taxes and fees add up. The CFPB’s research on cash-out refinances notes that these costs can be substantial and that paying them is a common use of the proceeds.
- Pricing. A loan-level price adjustment applies to certain cash-out loans, based on LTV and credit score. It is built into the pricing, not shown as a line item, so it never appears as a fee. Compare Loan Estimates.
- Ratios and reserves. A debt-to-income ratio above 45% can trigger a reserve requirement in Fannie Mae’s automated findings on cash-out loans. The wholesale conventional programs start at a 620 decision score, with the automated finding governing most files and a 50% total ratio ceiling.
- Mortgage insurance. Above 80% LTV mortgage insurance applies. On a standard cash-out at the 80% cap it generally does not.
A larger new balance also raises the payment and the interest paid over time. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
When the Cap Is Too Low
Three options exist when the cap leaves you short. Reduce the request to fit the room. Wait for value or paydown to widen it. Or look at another lane: a second lien or home equity line that leaves your first mortgage alone, FHA, VA or jumbo programs, each with its own rules. None of these gets more out of a conventional cash-out. They are different products with different costs.
Lendmire’s cash-out refinance programs sit in the conventional lane, and a broker can compare them against keeping the loan you have. For a file where cash is needed for a specific purpose, see Lendmire’s piece How Much Equity a Conventional Cash-Out Refinance Releases.
Which Ceiling Applies to You: A Short Checklist
1. Is the home your principal residence, a second home or a multi-unit? That sets the percentage. 2. Is the existing first mortgage at least 12 months old, and has a borrower been on title six months? 3. Multiply value by the cap, then subtract the payoff and any lien you keep. 4. Subtract financed costs, prepaids and escrows. 5. Compare the resulting loan to your county’s conforming limit. The smaller number controls. 6. If the result is thin, ask whether limited cash-out fits the need better.
Key Terms Defined
LTV: The new loan divided by the home’s value.
CLTV: Total of all loans on the home divided by its value.
Seasoning: The minimum time you must hold the loan or the title before a cash-out is allowed.
Conforming loan limit: The county dollar ceiling on loans the agencies will buy.
LLPA: A loan-level price adjustment built into the pricing of certain loans.
Limited cash-out: A refinance that pays off the loan and costs and returns only a small amount of cash.
Frequently Asked Questions
Can I take cash from the equity above the 80% cap?
No. The cap limits the new loan, and equity above that line stays in the home. The cash you get is only the room under the cap after payoffs and costs. To reach more, you would need a different program or more value.
What if 80% of my home’s value is more than the loan limit?
The lower number controls. The county conforming limit caps loan size, so the rest of the cap room goes unused. If the loan crosses the limit, it moves into the jumbo lanes with different rules.
Does a low appraisal change how much I can take out?
Yes. The cap is a share of appraised value, so a lower value shrinks the cap amount and the cash with it, point for point. A reconsideration request with better comparable sales can sometimes help.
Does my second mortgage or HELOC count against the cap?
Yes. Fannie Mae applies the cap to combined LTV, so a lien that stays in place uses headroom. A second paid off into the new loan is cash-out and comes out of the room.
Is limited cash-out the same as cash-out?
No. Limited cash-out allows higher leverage and returns only a small amount of cash. Once the cash back passes that allowance, the file is a cash-out with the stricter cap.
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. Figures here are subject to lender guidelines and full file review, and nothing is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Eligibility Matrix
2. Freddie Mac Guide Section 4203.1
3. FHFA Conforming Loan Limit Values
4. Selling Guide on subordinate financing
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. Selling Guide’s limited cash-out section
7. CFPB Research on Cash-Out Refinances
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: The Case for a Conventional Cash-Out Refinance in the Second-Lien Era · Can a Conventional Cash-Out Go Above the Cap Without Mortgage Insurance? · Conventional Cash-Out Refinance Documentation for Every Income Type
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.