The Quick Read: On a one-unit home you live in, a conventional cash-out refinance usually lets you borrow up to 80% of the home’s appraised value. That means you keep at least 20% equity after closing. The cap drops to 75% for two- to four-unit homes you occupy and for second homes, subject to lender guidelines and full file review.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
What Does “Cash-Out” Actually Mean?
A cash-out refinance replaces your current mortgage with a new, larger one. The new loan pays off the old balance and any closing costs you finance into it. Whatever is left comes to you as cash.
Freddie Mac’s Guide section 4301.5 defines it simply: a mortgage with no specific restrictions on how you use the proceeds. Fannie Mae draws a line between “limited cash-out” and “cash-out” refinances. Limited cash-out is the rate-and-term style, where the new loan only pays off the old one and your costs, with a small amount of incidental cash back.
Why does the line matter? The cap on how much you can borrow is very different. On a one-unit primary residence, the Fannie Mae Eligibility Matrix allows limited cash-out leverage far above the cash-out cap. Across the wholesale programs I place files with, a rate-and-term refinance on a one-unit primary home reaches 95% loan-to-value (LTV), and up to 97% in narrow cases. True cash-out stops at 80%.
That gap is the lender telling you something: taking cash out of a home raises the risk, so the cushion gets bigger.
The Core Rule: How Much Equity Stays Behind
Equity is your home’s value minus what you owe. LTV is the new loan divided by the home’s value. They are two sides of the same coin: 80% LTV means 20% equity remains. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Here is the cap by occupancy and property type for conventional cash-out refinances:
| Property | Max LTV | Equity left |
|---|---|---|
| One-unit primary residence | 80% | 20% |
| Two- to four-unit primary residence | 75% | 25% |
| Second home | 75% | 25% |
Occupancy decides the leverage. If the home is a rental rather than your residence, the cap sits at or below the second-home level, and that is a different loan lane than this article covers.
The Consumer Financial Protection Bureau’s guide to using home equity says lenders typically want you to keep 10% to 20% of your home’s value as equity. It also says no option turns 100% of your equity into cash. That is general consumer guidance covering several products. For a conventional cash-out refinance, 80% is the figure that matters.
How the Loan Is Underwritten, Step by Step
Underwriting is the lender’s review of whether you and the home fit the program. Here is the sequence a conventional cash-out file follows.
Step 1: The appraisal sets the value. A cash-out refinance requires a new appraisal. The appraised value is the bottom half of the LTV fraction, so a low number shrinks everything. Freddie Mac’s cash-out refinance page confirms a new appraisal and inspection report is part of the process.
Step 2: The cap sets the ceiling. Multiply the appraised value by 80% (one-unit primary home). That is the largest new loan the program allows.
Step 3: The payoffs come out first. The new loan has to retire your existing first mortgage, any other liens being paid off, and any closing costs you roll in. Cash to you is what remains.
Step 4: Seasoning is checked. Two separate clocks run here. At least one borrower must have been on title for six months. And if the proceeds pay off a first mortgage, that loan must be at least 12 months old, measured note date to note date. Many people merge these into one waiting period. They are two tests.
Step 5: Automated underwriting reviews the file. The agencies’ automated systems look at credit, income, total debt ratio and reserves. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. Manually underwritten loans run tighter, at 36% or 45% depending on the file’s strengths. Scores and reserves tend to be stricter for cash-out than for limited cash-out.
Step 6: Pricing reflects the risk. Fannie Mae applies a loan-level price adjustment to many cash-out refinances, based on LTV and credit score. Freddie Mac charges credit fees on cash-out loans too. Neither is quoted here. They simply mean a cash-out loan costs more at the pricing level than a limited cash-out loan on the same house.
Mortgage insurance enters the picture only above 80% LTV. On the standard cash-out lane, the 80% cap keeps you at or below that line. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A Worked Example in Percentages
Take a home appraised at 100 units of value. Say you owe 50% of that on your current mortgage, and you plan to finance closing costs equal to about 2% of the value.
- Maximum new loan: 80% of value.
- Payoff of the old mortgage: 50%.
- Financed closing costs: about 2%.
- Cash to you: roughly 28% of the home’s value.
You started with 50% equity and finish with 20%. The lender needed you to keep that last 20% untouched.
Now run the downside. Say the appraisal comes in 10% lower than you expected. The maximum loan shrinks by the same 10%, but your payoff and costs stay fixed. The cash you can take falls by far more than 10%. A homeowner who counted on 28% might see closer to 20%. Run this version before you plan a project around the cash.
The reverse calculation works too. Start with the cash you need, add your payoff and costs, and divide by 0.80. That tells you the minimum home value the deal requires. If your realistic value falls short, the loan won’t reach.
Equity Going In Versus Equity Left After Closing
This trips up many borrowers. “I have 25% equity, so I can cash out 5%” sounds logical, and it is close to right. To take any meaningful cash, you need well more than 20% equity going in. The cap measures what you owe after closing, not what you have today. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
A homeowner with exactly 20% equity can refinance but takes nothing out. The new loan at 80% simply replaces the old balance. Equity of 35% or 40% gives you real room.
Where the General Rule Breaks
The 80% figure is the headline. These named situations change it.
Two- to four-unit homes. If you live in one unit and rent the others, the cap falls to 75%.
Second homes. The cap is 75% on a one-unit second home.
Manufactured homes. Per the Fannie Mae matrix, single-width manufactured homes are limited to purchase and limited cash-out. Cash-out is not available on them. Rules for other manufactured homes are stricter and lender-specific.
Delayed financing. If you bought the home with cash, you don’t have to wait out the normal seasoning period. The new loan can’t exceed your documented purchase investment plus financed closing costs, and it still has to fit the cash-out LTV cap. The purchase must be arm’s length, and you must document where the funds came from. Details sit in Fannie Mae’s Selling Guide B2-1.3-03.
Seasoning exceptions. The 12-month first-lien rule has carve-outs. Examples include buying out a co-owner’s equity, refinancing a HELOC that serves as the first lien, and construction-to-permanent loans. Freddie Mac’s product page notes no seasoning requirement for inherited homes.
Free-and-clear homes. Paying off no mortgage still counts as cash-out. The six-month title rule applies.
A student-loan feature. Fannie Mae waives its cash-out pricing adjustment when its student-loan requirements are met.
Texas homestead. The state constitution caps a homestead cash-out at the agency figure, and the higher-leverage wholesale lane described next is not written there.
The higher-leverage lane. Among the wholesale programs I work with, one lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a 30-year fixed term, a primary residence, a conforming balance, and its own six months of seasoning. Think of it as the exception that proves the rule: it exists, but the file has to fit tightly. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Also, the new loan must stay within the conforming loan limit set by the Federal Housing Finance Agency, which changes by county. Above that, jumbo programs take over with their own guidelines.
Who Actually Sets the Number?
Three layers decide your ceiling.
1. Agency guidelines. Fannie Mae and Freddie Mac publish the caps. The two line up closely on a one-unit primary home.
2. Lender overlays. An individual lender can be stricter than the agency. Some set a lower cash-out cap than 80% or a higher credit floor. That is why two lenders can give two answers on the same house.
3. The automated finding. Your credit, income, ratios and reserves can reduce what the system will approve, even when the cap would allow more.
The cap is the maximum, not a promise. A broker earns their keep here, because comparing lenders means comparing overlays, not just headline numbers. Lendmire arranges conventional files through wholesale lenders, and each file is reviewed on its own merits. Lendmire’s cash-out refinance programs page lays out the lanes available.
Cash-Out Versus Rate-and-Term at a Glance
| Factor | Cash-out | Rate-and-term |
|---|---|---|
| One-unit primary LTV | 80% | 95% (97% in narrow cases) |
| Cash back | Any amount | Incidental only |
| Existing-loan age | 12 months if paid off | Not the same test |
| Pricing | Extra adjustment applies | Generally lower |
| Mortgage insurance | Not needed at cap | Above 80% |
If your goal is only a better term and you have thin equity, rate-and-term is the tool. If you need cash, expect to need the bigger cushion. Lendmire’s piece How Much Equity a Conventional Cash-Out Refinance Releases goes deeper on the amount side.
What Else the Lender Checks
Equity is only the first gate. The file also needs:
- A decision score that meets the program floor.
- A total debt ratio within the ceiling.
- Reserves where the findings call for them.
- Occupancy: every borrower must live in the home if it is a primary residence.
- Documented income and assets.
- Waiting periods after any credit event. The agencies set four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu, with shorter periods for documented extenuating circumstances.
Government loans differ. FHA and VA have their own cash-out rules, and I won’t mix their numbers into this page.
The Decision in Practice
A cash-out refinance is a trade. You get cash now. In return you own less of your home, the loan balance rises, and your rate and terms reset. The CFPB notes these loans are usually repaid over 30 years, so the balance falls slowly. The Federal Reserve’s refinancing page puts the other side plainly: you own less, it takes time to rebuild equity, and a sale would net you less.
Debt consolidation is the most common use of the cash. CFPB research, summarized in its cash-out refinance report, found borrowers most often cite paying off other debts, followed by home repairs. It also cautions that swapping unsecured debt for mortgage debt can raise foreclosure risk. The math tends to work when the all-in cost of the new loan is below the cost of the debt it replaces.
Ask yourself four things:
1. Is my equity well above 20%, so there is room to take cash? 2. Have I held the home six months, and is my current first mortgage 12 months old? 3. Does the cash earn its keep (a repair that protects value, debt that costs more than the new loan)? 4. Would a home equity loan or HELOC, which leaves my first mortgage in place, fit better?
That last one matters when your current loan is a keeper. A cash-out refinance replaces your mortgage. A second-lien product sits beside it.
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: your home’s appraised value minus what you owe on it.
LTV (loan-to-value): the new loan amount divided by the home’s appraised value.
Seasoning: the waiting period a lender requires, such as time on title or the age of the loan being paid off.
Limited cash-out refinance: a refinance that pays off the old loan and costs, with only small incidental cash back.
Loan-level price adjustment: a pricing add-on the agencies apply based on factors like LTV and credit score.
Delayed financing: a cash-out exception for homes bought with cash, allowing a refinance without the usual waiting period.
Frequently Asked Questions
Can I borrow against all my equity?
No. The 80% cap on a one-unit primary home leaves 20% untouched, and lender overlays can lower it further. Your actual cash also depends on your payoff, financed costs and the appraisal.
Is six months of ownership the only waiting period?
No. Two tests apply. One is six months on title. The other is that a first mortgage being paid off must be at least 12 months old, note date to note date. Exceptions exist for delayed financing, inheritance and certain special-purpose loans.
Does a paid-off home count as a cash-out refinance?
Yes. With no mortgage to pay off, any new loan is treated as cash-out, and the six-month title rule still applies.
Do Fannie Mae and Freddie Mac set different caps?
On a one-unit primary home the two agencies’ caps line up closely. Individual lenders may apply stricter overlays, so the ceiling you see can differ from one lender to the next.
What if the appraisal comes in low?
The maximum loan drops with it, and your cash drops by a larger share because the payoff stays the same. Run a lower-value scenario before you commit to a project that depends on the cash.
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 reflect general guidelines, vary by lender and file, and are not a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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. Freddie Mac Guide Section 4301.5
2. Fannie Mae Eligibility Matrix
3. CFPB Guide to Using Home Equity
4. Freddie Mac Cash-Out Refinance Product Page
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. Federal Reserve Board refinancing page
7. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Cash You Receive From a Conventional Cash-Out Refinance · Can You Do a Conventional Cash-Out Refinance Without a Mortgage? · How Much Equity a Conventional Cash-Out Refinance Lets You Borrow
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.