The Quick Read: No. A cash-out refinance has no down payment, because you already own the home. Equity takes the place of a down payment. On a conventional loan, the new mortgage generally has to stay at or under 80% of the home’s value on a one-unit primary residence, subject to lender guidelines and full file review. Closing costs still apply, but they usually come out of the new loan or your cash proceeds rather than your savings account.
Why There Is No Down Payment
A down payment exists to create equity. When you buy a home, you put in cash so the lender is not funding 100% of the value. When you refinance, that equity already exists. It sits in the house, built from past payments, past down payments, and any rise in value.
A cash-out refinance is one new mortgage that pays off your current one and hands you the difference in cash. The lender’s question is not “how much are you bringing?” It is “how much of this home’s value will be left unborrowed after the new loan?”
| Factor | Purchase | Cash-out refinance |
|---|---|---|
| Down payment | Yes, as little as 3-5% | None |
| What protects the lender | Your cash in the deal | Equity you already hold |
| Key test | Down payment and LTV | LTV cap on the new loan |
| Closing costs | Paid at closing | Often rolled in or taken from proceeds |
LTV means loan-to-value: the loan balance divided by the home’s appraised value. A $1 loan on a $1 home is 100% LTV. Lower is safer for the lender and cheaper for you in most cases.
What Replaces the Down Payment? Your Equity
Think of equity as your stake. On a conventional cash-out refinance, across the wholesale programs Lendmire places files with, the cap is 80% LTV on a one-unit principal residence. It drops to 75% on two- to four-unit principal residences and on second homes. That means you must keep at least 20% of the value untouched on the typical owner-occupied house. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
If you want to see the logic without dollar figures, picture a home with a current mortgage at 50% of its value. An 80% cap leaves room to borrow up to 30% of the value in new money, before closing costs come out. Hit the cap and the lender stops, no matter how much cash you would like.
Government loans work differently. HUD Mortgagee Letter 2019-11 cut the FHA cash-out limit from 85% to 80% of value. VA cash-out loans have their own rules, covered below.
One catch: every lien that stays on the home counts toward the cap. If you keep a second mortgage or HELOC (home equity line of credit), it uses up room. That room then isn’t available for your cash.
A common reason to read the full set of options is to compare programs. Lendmire’s cash-out refinance programs page lays out the conventional, FHA, and VA paths side by side.
How the Math Works, Step by Step
Here is the sequence a lender follows. No dollar figures needed.
1. Appraisal sets the value. The lender orders an appraisal. Value drives everything after it.
2. Apply the LTV cap. Take the cap for your occupancy and program, such as 80% on a one-unit primary residence for conventional.
3. Subtract what you owe. The payoff of your existing first mortgage comes off the top. So does any second lien that stays.
4. Subtract closing costs. They come out of the new loan amount.
5. You receive the remainder. That is your cash.
Closing costs deserve a straight word. “No down payment” does not mean “no costs.” There are still lender charges, title work, and an appraisal. Many borrowers let those come out of the loan, so nothing leaves their bank account at closing. The tradeoff is a larger balance. Any offer of a “no-cost” refinance still has the costs somewhere, usually built into the rate or the balance.
The Exceptions: When You Might Actually Need Cash
Three situations can put real money on the table.
You are short on equity. If the cap leaves too little room, the loan does not work as a cash-out. You can wait, pay down the balance, or use a different tool.
You do a cash-in refinance. This is the reverse of cash-out. You bring money to closing to lower the balance, perhaps to hit a lower LTV and avoid mortgage insurance. It is optional, not a down payment.
You use VA and borrow above the limit. VA’s cash-out page says a no-down-payment loan can go up to the conforming loan limit in most areas, with more allowed in some high-cost counties. Borrowing above that amount requires a down payment.
Rules That Can Block You Even With Plenty of Equity
Equity is not the only gate. Timing and occupancy trip up well-qualified borrowers.
- Seasoning on the old loan. On conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted from note date to note date.
- Time on title. At least one borrower generally must have been on title for 6 months. Exceptions exist for delayed financing, inheritance, and legal awards. VA also requires you to live in the home.
- Property type. Manufactured homes carry a lower cash-out cap than a site-built home. Two- to four-unit properties and second homes sit at 75%.
If you own the home free and clear, a new mortgage on it still counts as a cash-out refinance. That surprises people who assume “no existing loan” means a simpler path.
The delayed financing exception matters if you bought with cash recently. It can let you pull money back out within the six-month window, subject to lender guidelines.
Does It Matter Which Loan Type You Use?
Yes. Leverage and rules shift by program.
| Program | Cash-out allowed? | Key limit |
|---|---|---|
| Conventional | Yes | 80% LTV, one-unit primary residence |
| FHA | Yes | 80% of value |
| VA | Yes | Conforming limit with no down payment |
| FHA Streamline | No | No-cash-out only |
| VA IRRRL | No | No-cash-out only |
The FHA Streamline and the VA IRRRL (Interest Rate Reduction Refinance Loan) are for borrowers who already hold an FHA or VA mortgage. Both exist to change the loan terms, not to pay you cash. A common misunderstanding is that a “streamline” can give money back. It does not.
Rate-and-term refinances are a different animal. On a one-unit primary residence, those can reach 95% LTV, since little or no cash comes out. Fannie Mae also limits how much cash you can take back before the loan is reclassified: SEL-2025-08 sets the cap at the greater of 1% of the new loan balance or $2,000. Go above it and the loan becomes a full cash-out refinance, with the tighter cap and extra pricing that come with it. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
There is also a wholesale conventional lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so that lane is not written there. All of this is subject to lender guidelines and full file review.
What Lenders Look at Besides Equity
Passing the LTV test is step one. The rest of the file matters just as much.
- Credit score. The wholesale conventional programs start at a 620 decision score. Some lenders set a higher floor.
- Debt-to-income ratio (DTI). That is your monthly debts divided by gross monthly income. The automated finding governs most files, with a total ratio ceiling of 50%.
- Payment history. Late payments on the loan you are replacing draw attention.
- Reserves. Some files require cash left over after closing.
- Documents. Expect ID, pay stubs, W-2s, traditional personal-income documentation, asset statements, and mortgage statements. VA files add the Certificate of Eligibility.
Waiting periods after a credit event are agency rules: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Can You Use the Cash as a Down Payment on Another Home?
Often, yes, because cash-out proceeds generally carry no restrictions on use.
The money does not care where it goes, but the next lender will. They will want to see the new payment on your current home counted in your ratios. Occupancy of the next property also changes the leverage it can reach: a second home tops out at lower leverage than a primary residence. Lendmire’s piece How Much Second Home Down Payment a Cash-Out Refinance Funds walks through that sizing.
If You Don’t Have Enough Equity
You have four honest options.
1. Wait. Payments and appreciation both build equity over time.
2. Pay down the balance. A cash-in refinance resets your LTV.
3. Keep your loan and add a HELOC. You avoid touching the first mortgage. Lendmire’s comparison of a smaller HELOC versus a larger cash-out refinance covers the tradeoffs.
4. Skip it. If the cash is not essential, keeping the loan you have may be the better call.
What a Cash-Out Really Costs You
A bigger loan means a bigger payment in most cases, and the term may stretch out. The balance falls more slowly. The CFPB‘s home equity guide notes that lenders typically require you to keep at least 10% to 20% of your home’s value as equity, and that a cash-out can change the payment, the term, and the rate.
Mortgage insurance is the other piece. It is required above 80% LTV on conventional loans, can be cancelled at 80% of the original value with good payment history, and ends automatically at 78%. Because the cash-out cap sits at 80%, most conventional borrowers sit at or under that line from day one.
A practitioner’s note: the borrowers who regret a cash-out most are the ones who pay off credit cards with it and then run the cards back up. The CFPB’s research says paying off other debts is the most common use, with home repairs second. Turning unsecured debt into debt secured by your home raises the stakes if the payment becomes hard to carry. Plan the use before you plan the loan.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Equity: The part of your home’s value you own outright, after subtracting what you owe.
LTV (loan-to-value): Your loan balance as a percentage of the home’s appraised value.
Seasoning: The minimum age a loan or ownership period must reach before a new refinance is allowed.
Rate-and-term refinance: A refinance that changes your rate or term and pays off the old loan, with little or no cash back.
Cash-in refinance: A refinance where you bring money to closing to lower your balance.
Subordinate lien: A loan behind your first mortgage, such as a second mortgage or HELOC.
Frequently Asked Questions
Do I need 20% down to take cash out of my home?
No. You need roughly 20% equity left after the new loan on a conventional one-unit primary residence, which is a different thing. Equity is what you already own. The 80% LTV cap decides how much you can borrow, subject to lender guidelines.
Will I pay closing costs on a cash-out refinance?
Yes, there are closing costs. Many borrowers have them taken from the loan or the cash proceeds, so little or nothing comes from savings at closing. That raises your balance or lowers your cash. A “no-cost” refinance simply builds those costs into the rate or the balance.
Can I cash out on a home I just bought?
It depends. Conventional loans generally want 6 months on title and a first mortgage at least 12 months old. A delayed financing exception can help if you bought recently. Occupancy and program rules still apply.
Does a VA cash-out loan need a down payment?
Usually not, up to the conforming loan limit in most areas. Borrowing beyond that amount requires a down payment. You also need a Certificate of Eligibility and must live in the home.
Is an FHA Streamline or VA IRRRL a cash-out loan?
No. Both are no-cash-out products for people who already hold an FHA or VA loan. If you want cash from your equity, you need a true cash-out refinance.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs 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. HUD Mortgagee Letter 2019-11
4. CFPB
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: Cash-Out Refinance and Stay vs Sell on a Texas Homestead · How to Pick Which Loans to Fold Into One Cash-Out Refinance Payment · How to Buy Out a Spouse With a Cash-Out Refinance on One Income
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.