The Quick Read: A conventional cash-out refinance replaces your current mortgage with a bigger one and pays you the difference. On a one-unit home you live in, the new loan generally tops out at 80% of the appraised value. Lenders check four things: your credit score, your debt-to-income ratio, the equity left after closing, and how long you have held the loan and the title. Every figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Key Takeaways
- The cap is 80% loan-to-value on a one-unit primary residence. It drops to 75% on two- to four-unit homes, second homes and investment property.
- The mortgage you are paying off must be at least 12 months old. At least one borrower must have been on title for 6 months.
- Wholesale conventional programs start at a 620 decision score. Most files are decided by the automated finding, with a 50% total-ratio ceiling.
- Your cash is the cap minus your payoff, your closing costs and any required lien payoffs. It is not simply your equity.
- Moving credit card debt onto your home swaps unsecured debt for debt your house secures. Weigh that before you sign.
What Is a Conventional Cash-Out Refinance?
A cash-out refinance is a new first mortgage that pays off your existing first mortgage and gives you the leftover as cash. Conventional means it follows Fannie Mae and Freddie Mac rules rather than FHA or VA rules. Freddie Mac defines it as a mortgage with no specific restrictions on how you use the proceeds.
Fannie Mae also counts a new mortgage on a home with no lien as a cash-out refinance. So owning your home free and clear does not make it something else. It is still cash-out.
Compare it with a rate-and-term refinance, also called limited cash-out. That loan pays off the first mortgage, the closing costs and any purchase-money second lien. You get only incidental cash back. Because the lender takes less risk, limited cash-out allows more leverage: 95% on a one-unit primary residence, and 97% in certain agency-owned, first-time-buyer cases. Cash-out sits at 80%. That gap is the price of taking real money out.
If you want to see how the programs line up, Lendmire’s cash-out refinance programs page lays out the structures a mortgage broker can arrange through wholesale lenders.
How Is the Loan Underwritten, Step by Step?
Underwriting is the lender’s review of you, the home and the loan. On a cash-out file, it runs in a fixed order. Here is how it plays out across the conventional files a broker sees.
Step 1: The lender classifies the loan. It is cash-out, limited cash-out or free-and-clear cash-out. That label sets the leverage cap and the pricing grid.
Step 2: The seasoning clocks get checked. Seasoning is the minimum age of something. Here, it means the age of your existing loan and the time you have been on title. More on both below.
Step 3: You apply and document. Expect pay stubs or other income proof, asset statements, your current mortgage statement, and title information. Documentation depends on how the file is underwritten.
Step 4: Automated underwriting issues a finding. Most conventional files run through the agencies’ automated systems. That finding governs the credit and ratio review for most files. The ceiling on your total ratio is 50%.
Step 5: The appraisal sets the cap. Freddie Mac requires a new appraisal and inspection report on cash-out. The appraised value decides your loan-to-value ratio, so it decides the maximum loan. A low appraisal shrinks your cash first.
Step 6: Pricing gets set. Fannie Mae applies loan-level price adjustments to cash-out loans based on your credit score and loan-to-value. They stack with other adjustments. The agencies’ pricing framework follows direction from the FHFA, their federal regulator. Those adjustments are why pulling extra equity you do not need costs more. Figures change, and Lendmire does not publish them as prices.
Step 7: Closing, then a cooling-off period. You get a Loan Estimate early and a Closing Disclosure before signing. Then the rules give you a window to cancel (see the rescission note below). After that window, your old lender is paid off and the cash comes to you.
What Lenders Check: The Four Big Factors
Credit score
Wholesale conventional programs start at a 620 decision score. The decision score is the middle of your three bureau scores, or the lower of two borrowers’ middle scores. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. Some lenders set a higher floor than the agencies do, and those extra limits are called overlays.
Debt-to-income ratio
Debt-to-income is your monthly debt payments divided by your gross monthly income. Automated findings allow a total ratio up to 50%. Manually underwritten loans are held to 36% or 45%, with reserve and score factors from the Fannie Mae Eligibility Matrix. On casefiles run through Fannie Mae’s automated system, a ratio above 45% triggers six months of reserves. Reserves are liquid savings left after closing. They are the cushion that offsets a heavy ratio.
Equity left after closing
You must leave equity in the home. On a one-unit principal residence, the cap is 80% of appraised value. On a two- to four-unit home it is 75%. Second homes and investment property are also at 75%. Manufactured homes face a lower cap, and a single-width manufactured home is not eligible for cash-out at all, per the Fannie Mae Eligibility Matrix and its manufactured housing product matrix.
Mortgage insurance protects lenders on loans above 80% loan-to-value. A standard cash-out loan stops at 80%, so it usually does not carry it.
Seasoning of the loan and the title
The first mortgage you are paying off must be at least 12 months old, counted from note date to note date. Fannie Mae measures title time to the disbursement date. Freddie Mac measures it to the note date. That small difference can matter if you are right at the line.
The 12-month test does not apply to second liens you pay off in the transaction. And a home you own outright has no existing loan to measure, so only the title clock applies.
How Much Cash Can You Actually Get?
Your cash is the maximum loan minus everything the loan must pay. Equity alone overstates it. A quick estimate often stops at value times cap minus balance. Real files keep going.
Run the numbers this way, in percentages of the appraised value. These are modeled assumptions, not market data.
- Appraised value: 100%.
- Maximum loan at the one-unit cap: 80%.
- Your current first mortgage payoff: say 50%.
- Room before costs: 30%.
- Then subtract: closing costs, any second lien or tax lien that must be paid, and prepaid items that go into escrow.
What is left is your cash. The more you owe on the other lines, the thinner the check. Appraisal risk works the same way. If the value comes in 5% lower than you hoped, the cap moves with it, and your cash shrinks by more than that.
Now run a free-and-clear home. There is no payoff, so the whole 80% cap is available before costs. Same rules, different subtraction.
Where the General Rule Breaks
The 80% and 12-and-6 rules cover most files. A few situations bend them.
Delayed financing. A cash buyer can sometimes refinance before the six months pass. Fannie Mae’s delayed financing exception needs an arm’s-length purchase and documented proof of where the purchase money came from. It is narrow. Read the guide section first.
Inheritance and legal awards. Seasoning exceptions exist for inherited homes and certain legal awards. A revocable trust can also count toward your six months if you are its primary beneficiary.
A listed home. If the home was listed for sale, it must come off the market on or before disbursement.
Two- to four-unit homes, second homes and investment property. Occupancy and unit count decide the leverage. The cap is 75% on all of them. A consumer cash-out on your own one-unit home gets the best tier.
A wholesale high-leverage lane. One lane reaches 89.99% loan-to-value with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. It is not written in Texas, where the state constitution caps a homestead cash-out at the agency figure. Availability depends on the lender and your full file.
Student loan payoff. Fannie Mae can waive the cash-out price adjustment when proceeds pay off eligible student loans and other conditions are met.
Lender overlays. An agency cap is a ceiling, not a promise. A lender can set tighter limits, which is one reason a broker shops several wholesale lenders for the same file.
Cash-Out, HELOC, Home Equity Loan or Keep What You Have?
Cash-out is one tool for tapping equity. It is not the only one. Here is how the choices differ in practice.
| Option | Best when | Main tradeoff |
|---|---|---|
| Cash-out refinance | You want one loan and a lump sum | Replaces your whole first mortgage |
| HELOC | You need cash in stages | Second lien with a variable draw |
| Home equity loan | You need a fixed sum | Second lien on top of your first |
| Keep your first mortgage | Your current loan is strong | You do not access the equity |
The deciding question is your current loan. If your existing first mortgage has terms you like, replacing it just to pull cash can cost you. A second lien leaves it untouched. If your loan is weak, or you also want to change the term, a cash-out refinance fixes both at once.
Fannie Mae adds a pricing charge when your combined loan-to-value runs above your first-lien loan-to-value. The undrawn part of a HELOC is not counted. That keeps an unused line from raising the cost of a first mortgage.
What Does It Do to Your Budget and Your Risk?
The loan balance goes up. A new term starts over. Stretching the term can lower your monthly payment while raising your total cost over the life of the loan. Check your old mortgage for a prepayment penalty before you swap it.
Debt consolidation deserves a straight look. The CFPB’s cash-out research found that cash-out borrowers’ credit scores rose after the refinance, then slipped over time, though they stayed above where they started. Credit card balances tended to creep back toward their earlier levels. If the spending does not change, you can end up with the old debt plus a bigger mortgage.
The bigger issue is what secures the debt. Missing a credit card payment is unlikely to cost you your home. Missing a mortgage payment can. When you move unsecured debt into your mortgage, you raise the stakes.
You do get a safety valve. On a refinance of your primary residence, you generally have three business days to cancel after closing. You can waive it only for a bona fide personal financial emergency. Funds do not move until that window ends.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Common Reasons Files Stall (and the Fix)
- Your ratio is above the ceiling. Pay down a card or loan first, or add an eligible co-borrower, then reapply.
- The loan is too young. Check the note date on your current mortgage. Waiting a few months can open the door.
- You are not on title long enough. Look for an exception, like delayed financing or inheritance, before you wait.
- The appraisal comes in low. Ask for the appraisal report, then ask for a reconsideration with comparable sales. Or take a smaller cash amount.
- Your score sits below the lender’s floor. Some lenders set a higher minimum than 620. Another wholesale lender may take the same file.
- You want more than the cap allows. A second lien may bridge the gap, though it changes your combined loan-to-value.
Credit events carry waiting periods set by the agencies: 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.
Key Terms Defined
Loan-to-value (LTV): Your loan amount divided by the home’s appraised value. A lower ratio means you keep more equity.
Seasoning: The minimum age required of your current loan and of your time on title before you can cash out.
Reserves: Liquid savings you still hold after closing, counted as a safety cushion.
Debt-to-income ratio: Your monthly debt payments divided by your gross monthly income.
Lien: A legal claim on your home that secures a debt. Your mortgage is a lien.
Loan-level price adjustment: An extra pricing charge the agencies apply based on credit score, loan-to-value and loan purpose.
What the Decision Looks Like in Practice
Start with the purpose. Pay off a specific debt, fund a specific repair, or cover a specific cost? A defined goal tells you how much equity to touch. Pulling the maximum “just in case” raises your balance and your pricing.
Then compare the full picture, not one number. Ask several lenders for a Loan Estimate and set them side by side. Look at the total cost of the loan, your term, and what happens to your current loan.
Finally, test your own file against the four factors: score, ratio, equity and seasoning. If one is close, fix it before you apply. A broker can run the same file against several wholesale programs and show you where the limits fall.
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 a closer look at side-by-side terms, Lendmire’s walkthrough of how to compare conventional cash-out program terms is a good next read.
Frequently Asked Questions
How soon after buying can I do a cash-out refinance?
Usually after six months on title, and your existing first mortgage must be at least 12 months old. The delayed financing exception lets some cash buyers refinance sooner, with documentation of the purchase funds. Exceptions also exist for inheritance and legal awards.
Does a cash-out refinance hurt my credit?
Applying triggers a credit inquiry, which can dip your score briefly. The CFPB’s research found scores rose after the refinance as balances were paid off, then slipped over time. What happens next depends on how you use the cash and manage the new payment.
Do I need mortgage insurance?
Usually not at the standard cap. Mortgage insurance is required above 80% loan-to-value, and a conventional cash-out on a one-unit primary residence stops at 80%. A wholesale lane reaches 89.99% with no mortgage insurance, under stricter score and ratio conditions, subject to lender guidelines.
What if the appraisal comes in low?
Your maximum loan drops with the value, and your cash drops faster. You can ask for a review with better comparable sales, take less cash, or wait. A lower appraisal can also move you into a different pricing tier.
Can I cash out on a second home or rental?
Occupancy decides the leverage. Second homes and investment property are capped at 75% loan-to-value, lower than the 80% on your own one-unit residence. The rest of the rules, seasoning included, work the same way.
For your own numbers, request a scenario review with Lendmire.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Freddie Mac Guide Section 4301.5, Cash-Out Refinance Mortgages
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Freddie Mac Cash-Out Refinance Product Page
4. Fannie Mae Eligibility Matrix
5. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
6. CFPB: Can I Ever Waive My Right to Rescind?
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 You Can Borrow With a Conventional Cash-Out Refinance? · How a Lender Qualifies You for a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance for Homeowners Who Want the Basics
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
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.