The Quick Read: A cash-out refinance reaches only part of your equity, and a sale reaches nearly all of it. On a one-unit primary residence, a conventional cash-out tops out at 80% of the home’s value, so at least 20% stays in the house. A sale releases the full equity but ends your time in the home, and it brings selling costs and a need for new housing. A cash-out fits people who plan to stay. A sale fits people who are ready to move.
Side-by-Side
| Factor | Cash-Out Refinance | Sale |
|---|---|---|
| Leverage cap | 80% LTV, one-unit primary residence | No cap on proceeds |
| Cap on 2-4 units | 75% LTV | Not applicable |
| Credit floor | Wholesale programs start at a 620 decision score | None |
| Mortgage insurance | Conventional cash-out stays at or under 80%, so none is typical | Not applicable |
| Occupancy | Primary residence for the lanes here | You leave the home |
| Documentation | Full file: credit, income, appraisal, title | Listing, contract, payoff statement |
| Seasoning | First mortgage 12 months old; 6 months on title | None |
| What you keep | The home, plus a larger loan against it | Cash, minus payoff and selling costs |
Every program figure above is subject to lender guidelines and full file review. None of it is a commitment to lend.
What “Usable” Equity Actually Means
Equity is the home’s appraised value minus every lien on it. Usable equity is smaller. It is what the cap allows on the new loan, minus what you owe, minus closing costs that come out of the proceeds.
The cap limits the size of the new loan as a share of value. It does not cap how much of your equity you can take. Those are different ideas, and mixing them up is a common mistake on these files.
Here is the order of deductions on a cash-out:
1. Start with the appraised value. The appraisal sets the ceiling for everything that follows.
2. Apply the program cap. On a one-unit primary residence under the conventional program, that is 80%. On two to four units it is 75%, per the Fannie Mae LTV, CLTV and HCLTV table.
3. Subtract the payoff of the existing first mortgage and any lien you are paying off. A second lien or HELOC that stays in place counts against the combined limit.
4. Subtract closing costs and prepaids that are not financed. Under Fannie Mae’s cash-out guidance, costs can be financed inside the limit. Financing them shrinks the cash you receive instead.
5. What is left is the cash in your hand.
A sale runs differently. Take the sale price, subtract the loan payoff and the costs of selling, and the remainder is yours. No new qualification is needed, and no leverage cap applies. The cost is the home itself.
Key Terms Defined
Equity: The appraised value of the home minus all liens against it.
LTV (loan-to-value): The loan balance divided by the appraised value, shown as a percentage.
Combined LTV: The same ratio, but with every lien on the home added together, including a HELOC that stays in place.
Limited cash-out (rate-and-term) refinance: A refinance that pays off the existing first mortgage and closing costs, with only incidental cash back.
Seasoning: The minimum time you must hold the home or the existing loan before a cash-out is allowed.
What Shrinks the Cash You Receive
Four things cut into usable equity on almost every file.
The appraisal. A lower value cuts the cap directly. Appraisal reconsideration is a normal step when comparable sales come in light, but it needs recent, documented sales near the home.
Other liens. A second mortgage or HELOC that stays in place eats into the combined limit. Paying it off with the new loan frees that room, but it also uses cash you might have wanted.
Financed costs. The CFPB explains that a “no-cost” refinance still has costs. They are covered by a higher rate or added to the loan balance. Added to the balance, they reduce both the equity left and the cash received.
Eligibility gates. Equity on paper is not the same as equity you can use. Under Fannie Mae’s cash-out rules, 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. If debt-to-income is above 45% on an automated finding, six months of reserves are required. Wholesale programs add their own overlays on top of agency rules.
Files that assume the seasoning rules away get kicked back. Check the dates before ordering the appraisal.
When a Cash-Out Refinance Is the Better Fit
Cash-out is the better fit when the home still works for your life and you need money for a specific purpose.
- You plan to stay. Selling ends occupancy. A refinance keeps it.
- You have a clear use for the cash. Home repairs and paying down other debts were the most common uses in CFPB survey data. A defined purpose helps you judge whether the added loan is worth it.
- You can carry a larger loan. A cash-out replaces the old loan with a bigger one. VA notes in its consumer guidance that a cash-out rarely lowers the monthly payment. Plan for the payment to go up, and for the term to reset.
- You have real room above the cap. Think of a one-unit home with a low balance against its value. The gap between your balance and the 80% line is the usable slice. A wide gap makes the closing costs easier to justify.
The wholesale network also has a lane that reaches 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% ratio ceiling, on a thirty-year fixed, primary residence, conforming balance, with its own six months of seasoning. It is not written on a Texas homestead, where the state constitution caps cash-out at the agency figure. Lendmire arranges these through its cash-out refinance programs, subject to lender guidelines and file review.
Government loans change the picture. FHA cash-out is capped at 80% of appraised value under HUD Mortgagee Letter 2019-11, down from 85% before that rule. VA’s cash-out loan page says the borrower must live in the home. VA rules can allow far higher financing than conventional or FHA, though lenders may set tighter limits.
One more mismatch to avoid: a streamline is not a cash-out. The FHA Streamline and the VA IRRRL are for lowering the cost of an existing government loan. They pay out essentially no cash.
When a Sale Is the Better Fit
A sale is the better fit when the equity matters more than the house.
- You are ready to move. A sale is often a strong option that frees all of the equity, because there is no cap on proceeds.
- The cap leaves too little. Say your balance already sits close to 80% of value. A cash-out then yields a thin slice, and closing costs can eat most of it. That is a signal the refinance may not pay for itself.
- You cannot qualify for a bigger loan. A sale needs no new credit review, no debt-to-income test and no reserves. A refinance needs all three.
- You do not want more debt on the home. The CFPB’s research on cash-out borrowers notes that turning other debts into mortgage debt puts the home at risk if you fall behind. A sale carries no such risk.
The catch with a sale is that the equity is not all yours. Payoff and selling costs come out first. Selling costs vary from one sale to the next, so this article does not put a number on them. Get a written estimate from a listing professional before you compare. Then you still need a place to live, which has its own cost.
If you sell a main home, a gain exclusion may apply. Eligibility depends on factors such as ownership and use, so confirm the details with a tax professional before you decide.
Balanced Verdict
Run the comparison on one house, in this order. Write down the appraised value, then the cap, then the payoff, then financed costs. That gives you net cash from a refinance. Then take the likely sale price, subtract the payoff and selling costs, and set aside what new housing would cost. Compare the two.
If the refinance slice is thin, the sale or a different tool may be cleaner. If you plan to stay and the slice is wide, the refinance keeps the home and still releases cash. Neither path wins on every file. The right choice depends on how long you plan to stay and what the cash is for.
Cash-out is one of several paths. A refinance reaches up to 95% LTV on a one-unit primary residence and gives no meaningful cash. If your goal is keeping equity in the house, that is where the equity stays. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Frequently Asked Questions
Does a cash-out refinance ever release all my equity?
No. The cap on a one-unit primary residence is 80% of value on the conventional program, so at least 20% stays in the home. Two to four units have a 75% cap. The cap limits the new loan, not the share of equity you can take, which is why net cash is always less than gross equity.
What if I still owe a second mortgage or HELOC?
It counts. A lien that stays in place counts toward the combined LTV, which leaves less room for cash. Paying it off with the new loan frees room but uses some of the proceeds. Your lender will want payoff figures for every lien.
Can I do a cash-out soon after buying?
Usually not. The conventional rules call for the existing first mortgage to be at least 12 months old and for a borrower to be on title for six months. Delayed financing, inheritance and legal-award exceptions exist, with documentation requirements. Review them before applying.
Is a cash-out the same as a limited cash-out refinance?
No. A limited cash-out pays off the first mortgage and closing costs with only incidental cash back. Leverage can run higher, up to 95% on a one-unit primary residence, but the equity stays in the home. A cash-out hands you the difference in cash and carries the lower cap.
Does the cash from a refinance count as income or get taxed?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. Questions about selling a home are best taken to that same professional.
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. Reach out at 828-256-2183 or request a quote at Lendmire’s quote 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
1. Fannie Mae LTV, CLTV and HCLTV table
2. Fannie Mae Selling Guide, Cash-Out Refinance Transactions B2-1.3-03
3. CFPB, no-cost or no-closing refinance
4. CFPB newsroom on cash-out borrower outcomes
5. VA News, “You could be losing thousands”
6. HUD Mortgagee Letter 2019-11
8. CFPB’s research on cash-out borrowers
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 Much Cash an Equity-Rich Homeowner Gets From a Cash-Out Refinance · How Much Renovation Cash a One-Unit Cash-Out Refinance Releases · How Much a Cash-Out Refinance Costs When Consolidating Card Debt
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.