The Quick Read: On a one-unit home you live in, a conventional cash-out refinance generally lets the new loan reach 80% of the appraised value. That cap applies to value, not to your equity. Your cash is that 80% figure minus your payoff, any liens that stay, and financed costs. Everything is subject to lender guidelines and full file review.
Most people ask this question backward. They ask how much of their equity they can take. The lender asks how much total debt the house can carry. Those are different questions, and the gap between them is where surprises live.
This guide walks through the mechanics step by step. It covers the formula, the seasoning tests, the property types that cut the number, and the edge cases that break the rule. Then it covers the decision itself: whether taking the maximum is a good idea.
Key Terms Defined
Equity is the appraised value of your home minus what you owe on it.
LTV (loan-to-value) is your loan balance divided by the home’s appraised value, shown as a percentage.
CLTV (combined loan-to-value) adds every loan secured by the home, such as a HELOC or second mortgage that stays in place, then divides by value.
Cash-out refinance is a new mortgage that pays off your old one and hands you the difference in cash.
Seasoning is the waiting period a lender requires before you can do a certain kind of refinance.
Limited cash-out (rate-and-term) refinance replaces your loan with only incidental cash back. It does not tap equity in any meaningful way.
Appraisal is a professional opinion of your home’s value. It sets the number the cap applies to.
What Is the Borrowing Limit, Exactly?
The limit is a percentage of your home’s appraised value. On a one-unit primary residence, a conventional cash-out refinance tops out at 80% LTV. Two- to four-unit primary homes, second homes, and investment properties drop to 75%. Those figures come from the lender programs we place files with every week, and they match the Fannie Mae Eligibility Matrix. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Here is the part people miss. If you owe 50% of your home’s value, you do not get to borrow 80% of your equity. You get to bring total debt up to 80% of value. Equity left in the house after closing is at least about 20%.
Freddie Mac’s limits are similar to Fannie Mae’s but not identical, so a lender may route a borderline file to whichever agency fits better.
Compare that to a limited cash-out refinance. On a one-unit principal residence it reaches 95% LTV, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. The catch is that you get only incidental cash back. The Fannie Mae Selling Guide spells out that product. Cash-out is the one that lets you take real money, and it carries the lower cap. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
| Property type | Conventional cash-out cap |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
| Investment property | 75% |
Occupancy decides the leverage. That is the whole story for second homes and rentals on this page.
How Is the Number Calculated, Step by Step?
Your cash equals the cap times appraised value, minus your payoff, minus other liens you are clearing, minus financed costs. Five steps get you there. Work them in this order and the result will land close to what a lender shows you.
1. Start with the appraised value. The appraisal sets it. Your own estimate and an online home-value tool do not govern. Freddie Mac requires a new appraisal and inspection report on a cash-out loan.
2. Multiply by the cap. Value times 80% gives the largest total new loan on a one-unit primary home.
3. Subtract the payoff of your current first mortgage. The new loan replaces it, so it comes out first.
4. Subtract other liens you must clear. A second mortgage or HELOC that you pay off reduces cash. One that stays in place counts toward combined LTV instead, so it eats into the cap either way.
5. Subtract financed costs. Closing costs, prepaids, and points can be rolled into the new loan, but only inside the cap. Whatever is left is your cash.
A quick illustration, using percentages only. Say your home appraises at 100 units of value and you owe 50% of that. The cap lets the new loan reach 80%. The gap is 30% of value, before costs. Financed costs shrink that 30% further. If a HELOC sits on top, the gap shrinks again.
That is why “cap minus current balance” is a misleading shortcut. It gives you the ceiling on gross cash. Your net is always lower.
Why a Low Appraisal Hurts More Than You Think
The cap multiplies the appraisal, so every point of lost value cuts your cash by about 0.8 points of that value. Say your home appraises 5% below what you expected. Your maximum loan drops by roughly 4% of the expected value. Your payoff does not change. So the entire drop comes out of your cash.
When the margin is thin, a modest appraisal miss can erase most of the money you planned to take. Run your math at a lower value before you count on a number.
What Tests Do You Have to Pass Before the Cap Matters?
The cap is only the first gate. Seasoning, credit, and ratios decide whether you reach it at all. Each one can shrink or block the loan before the LTV math ever applies.
Seasoning. The first mortgage being paid off must be at least 12 months old, counted note date to note date. At least one borrower must also have been on title for six months. These timing tests can block a cash-out entirely if you are inside the window. Exceptions exist for delayed financing, inheritance, and legal awards.
Credit. The wholesale conventional programs we work with start at a 620 decision score. The automated underwriting finding governs most files, with a total debt-to-income ceiling of 50%. Manually underwritten loans use tighter ratios of 36% or 45%, tied to score and reserve factors in the Eligibility Matrix. Many lenders also set their own floor above the agency minimum.
Pricing adjustments. Both agencies charge extra for cash-out loans, and the adjustment moves with credit score and LTV. A higher score and lower LTV generally mean a smaller adjustment. Your Loan Estimate shows how that lands on your file.
Mortgage insurance. Because the cash-out cap on a primary home sits at 80%, you are generally not in mortgage-insurance territory. Mortgage insurance is required above 80% LTV on conventional loans, and it cancels at 78% under federal law. Your final LTV decides it on your file, so confirm it at the Loan Estimate stage.
One pattern from real files: the borrower who clears the cap often trips on the ratio. A bigger new balance means a bigger monthly obligation, and the 50% ceiling is a hard stop in automated underwriting. Cash-out math and debt-to-income math have to both work.
Is There a Way to Borrow More Than 80%?
Yes, in one lane. A wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio, on a thirty-year fixed loan, for a primary residence at a conforming balance. It carries its own six months of seasoning. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Treat that as an exception, not the default. Lenders set it on their own terms, and it is subject to lender guidelines and full file review. In Texas it does not apply, because a cash-out on the homestead is capped by the state constitution at the agency figure, and that lane is not written there.
If you are weighing where your equity could reach, Lendmire’s cash-out refinance programs page lays out the conventional options. Another useful read is Lendmire’s piece How Much Equity a Conventional Cash-Out Refinance Releases, which approaches the same question from the proceeds side.
Where Does the General Rule Break?
Seven situations bend or block the standard 80% rule. Knowing them saves you from planning around a number you cannot get.
- Delayed financing. If you bought with cash, you can do a cash-out before the usual seasoning. The original purchase must be arm’s-length, and the source of funds must be documented. The new loan cannot exceed your documented initial investment plus financed costs, and the LTV caps still apply to current value. Gift funds used for the purchase cannot be reimbursed. The Fannie Mae Selling Guide on cash-out transactions covers the conditions.
- Student-loan cash-out. Fannie Mae has a feature that waives the cash-out pricing adjustment when specific requirements are met, and the proceeds pay student debt directly.
- Multi-unit homes. The cap drops to 75% on two- to four-unit primary residences.
- Manufactured housing. Caps run lower, and they vary by lender. Ask before you assume.
- Co-ops. Co-op share loans do not allow cash-out on second homes.
- Down payment assistance. Community Seconds financing is not permitted with cash-out refinances.
- High-LTV refinance. That product is suspended and is not a path to cash.
Lender overlays add one more layer. An individual lender can set a cap below the agency maximum, so the agency number is a ceiling, not a promise. Jumbo and non-QM cash-out loans run on their own rules and fall outside this matrix.
Why Does a HELOC You Keep Still Count?
It counts because the cap is on combined debt. A second mortgage or HELOC that stays in place gets added to your new first mortgage when the lender measures CLTV. A large balance there can leave almost nothing under the cap.
Here is the practical fork. A cash-out refinance replaces your original mortgage with a new loan, which is how the CFPB describes it. A home equity loan or HELOC leaves your first mortgage alone. If your existing first-lien terms are worth keeping, that difference matters a great deal. If they are not, folding everything into one new loan can be cleaner.
Both paths use your home as collateral. Neither is free money.
How Much Equity Do You Need to Net a Target Amount?
Work the formula in reverse. Add your target cash, your payoff, any liens being cleared, and financed costs. That sum is the new loan you need. Divide it by 80%, and you get the minimum appraised value that makes it work.
For example, say you want cash equal to 10% of your home’s value and you owe 60%. Add costs of a few percent. Your new loan needs to be about 73% to 74% of value to clear the target. That fits under the 80% cap with a little room. Raise the target to 20% and the same math lands well past 80%, so the plan fails.
The test is simple. If the required loan is over 80% of the value you expect, the target is out of reach. Either lower the target, wait for more equity, or look at another structure.
Maximum Versus Sensible: How Should You Decide?
Reaching the cap is not the same as it being wise. The cap leaves roughly 20% equity untouched, and that cushion is the lender’s protection, not yours. Your own safety margin is a separate call.
Three questions help:
1. What is the money for? Home improvements that add value are a different case than covering monthly spending.
2. Can you carry the new balance? You are swapping your old loan for a larger one. The new monthly obligation depends on balance, term, and the rate on your Loan Estimate.
3. What if values dip? A full-cap loan has little room before you owe more than the home is worth.
The CFPB has found that borrowers often use cash-out proceeds to pay down credit card and auto debt. Their research shows credit scores rose after closing and then slipped over time, staying above pre-refinance levels. The agency also warns that turning non-mortgage debt into mortgage debt can put your home at risk of foreclosure if payments become unsustainable.
That is honest advice from a broker’s chair too. Paying off a card with house debt feels like relief. If the card balance creeps back, you now have both. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What If the Number Comes Out Too Small?
You have levers. None of them is magic, but each moves the math.
- Wait. More months of payments and any rise in value both raise your equity. Seasoning rules may also clear while you wait.
- Pay down the balance first. A lower payoff means more room under the cap.
- Clear or restructure a second lien. A big HELOC balance may be the real obstacle.
- Trim the costs you finance. Paying some costs out of pocket keeps more of the cap available for cash.
- Compare the alternatives. A HELOC or home equity loan can leave a low first-mortgage balance alone.
If the appraisal is the issue, ask the lender what it would take to support a higher value. Sometimes the answer is nothing, and you adjust the plan.
Frequently Asked Questions
Can I borrow 80% of my equity?
No. The 80% applies to your home’s value, not your equity. The new loan, plus any other liens that stay, can reach about 80% of appraised value. Your cash is that total minus what you owe and what you finance.
Does a closing cost come out of my cash?
Yes, one way or another. Closing costs, prepaids, and points can be financed into the new loan, but only within the cap. Financing them raises your balance and cuts your net cash. Paying them out of pocket keeps the loan smaller.
Do I need mortgage insurance on a cash-out refinance?
Usually not on a primary home kept at or under 80% LTV, since conventional mortgage insurance applies above 80%. Your final LTV decides it. If you use the wholesale lane that reaches 89.99% with no mortgage insurance, the 680 score and other conditions apply.
How long do I have to own the home first?
The first mortgage you are paying off generally must be at least 12 months old, and one borrower must have been on title for six months. Delayed financing, inheritance, and legal-award exceptions can change the timing. Confirm the details against your file.
How is this different from a HELOC?
A cash-out refinance replaces your original mortgage with one new loan. A HELOC or home equity loan sits behind your first mortgage and leaves it in place. The right choice depends on whether your current first-lien terms are worth keeping.
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.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.3-02: Limited Cash-Out Refinance Transactions
3. Freddie Mac Cash-Out Refinance
4. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
5. CFPB: A Look at Cash-Out Refinance Mortgages and Their Borrowers
6. CFPB newsroom: cash-out borrowers’ credit scores
7. CFPB: CFPB Cash Out Refinances and Paydown Behavior of Non Mortgage Debt Balances
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: Bank vs Wholesale Lender for a Conventional Cash-Out Refinance · How to Apply for a Conventional Cash-Out Refinance Step by Step · Can You Cash Out Refinance a Vacation Home Under Conventional Rules?
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.