The Quick Read: On a conventional cash-out refinance of a one-unit home you live in, the new loan tops out at 80% of the appraised value. That means you must keep at least 20% equity after the cash comes out. To walk away with real money, you need more than 20% going in. The gap between what you owe and that 80% line is your ceiling, and closing costs shrink it further.
What Equity Means to a Lender
Equity is the part of the home you own outright. A lender sees it from the other side: loan-to-value, or LTV, is the loan balance divided by the appraised value. A home with a balance equal to 60% of its value has 40% equity.
A cap on LTV is a floor on equity. Say the cap is 80%. Then you must keep 20% equity in the home after the refinance. Same rule, two ways of saying it.
One wrinkle: if another loan stays on the home, such as a home equity line, it counts too. Lenders add it to the first mortgage and call the total combined LTV. Your second lien eats into the room you have.
How Much Equity Is Enough for a Cash-Out Refinance?
Conventional cash-out refinances cap out at 80% LTV on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property cap at 75%. Across the wholesale programs placed through Lendmire, those are the working limits. They are subject to lender guidelines and full file review.
Here is the part most people miss. The cap is measured after the new loan is in place. It is not the equity you start with. If you start with exactly 20% equity, a cash-out has nothing to give you, because you are already at the 80% line. Cash is only possible when you owe less than 80% of value today.
Compare that with a plain rate-and-term refinance, which swaps the loan without pulling cash. Those go up to 95% LTV on a one-unit principal residence, with mortgage insurance above 80%. Homeowners with 10% equity often do fine on that lane and hit a wall on a cash-out. Cash-out is the stricter product because you are asking the lender to hold more risk.
If you want to see how the programs fit together, Lendmire’s cash-out refinance programs page lays out the main paths.
How Much Cash Can You Actually Take Out?
Cash is not “value minus balance.” It is a short chain of subtraction, and the appraisal sits at the front of it.
1. Appraised value. An appraiser sets it. Your Zillow guess does not count.
2. Maximum loan. Multiply the value by the cap, 80% on a one-unit home you live in.
3. Minus the payoff. Subtract what you owe on the first mortgage and any other liens being paid off.
4. Minus costs. Closing costs, points and prepaid items come out of what remains.
5. What is left is your cash.
Stop at step 3 and you have the gross room. Step 5 is the number that lands in your account. The two can differ by a lot on a small refinance.
Three Homeowners, Same Home Value
Run the numbers on three households. All three live in a one-unit home, and all three face the 80% cap. Think in percentages of value, since the dollar amounts change nothing about the logic.
| Owes today | Equity today | Room before costs |
|---|---|---|
| 50% of value | 50% | 30% of value |
| 70% of value | 30% | 10% of value |
| 78% of value | 22% | 2% of value |
The first household has plenty of room. The second can pull a decent amount but not a windfall. The third technically is reviewed on leverage, yet closing costs will likely swallow the entire 2%. Skip it.
When the Appraisal Comes in Low
Appraisal risk is where plans fall apart. Take the second household, owing 70% of what they thought the home was worth. The appraisal comes in 5% lower, so the home is valued at 95% of the old estimate.
Now the maximum loan is 80% of that 95, which is 76. They owe 70. Room shrinks from 10% of the old value to 6%. A 5% miss on value cut their cash by 40%.
That is the leverage in these numbers. A small error in value hits cash hard, because the cap multiplies the value but your payoff stays put.
The Reverse Math
Many homeowners start from a goal, such as a kitchen remodel. Work backward. You need equity of at least 20%, plus the cash you want as a share of value, plus the costs as a share of value.
Want cash equal to 10% of the home’s value? You need roughly 30% equity before costs, and a bit more to cover them. If you only have 25%, the plan does not fit and no amount of paperwork fixes that.
When Is the Cash Worth the Cost?
A cash-out refinance replaces your whole loan, not just a slice of it. The new, larger mortgage pays off the old one, and the extra comes to you as cash. The Consumer Financial Protection Bureau notes the monthly payment may rise and the payoff period may lengthen. It also notes that no home-equity option lets you convert 100% of your equity to cash.
Here is how a practitioner thinks about the minimum. Costs hit the whole new loan, not just the cash. So the cash you take should be big enough to justify them. If your room before costs is only a few percent of value, the math rarely pays. This is a judgment call, not a rule, and it depends on what the old loan carries and what you would do with the money.
Two sanity checks help:
- If you are keeping a loan with terms you like, a cash-out forces you to give them up. A separate second loan may leave the first mortgage alone. Lendmire’s piece How Much a Home Equity Loan Costs Next to a Cash-Out Refinance walks through that tradeoff.
- If you plan to use the cash on other debts, think hard. CFPB research found paying non-mortgage debts with mortgage debt can raise the risk of foreclosure. Your home becomes the collateral for what used to be unsecured.
Where the 80% Rule Bends
Most of the confusion about equity comes from treating 80% as universal. It is not. Here is where it moves.
Limited Cash-Out
A “limited” cash-out, also called rate-and-term, pays off the first mortgage, closing costs and any second lien that was used to buy the home. Only small, incidental cash comes back. This lane reaches 95% LTV on a one-unit principal residence, and 97% where the existing loan is agency-owned and a first-time-buyer program allows it. Above 80%, mortgage insurance applies. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The Fannie Mae Eligibility Matrix is where the cap by transaction type and occupancy lives. Read it for your property type before you assume a number.
FHA and VA
FHA cash-out refinances cap at 80% LTV, measured against what HUD calls the Adjusted Value. HUD Mortgagee Letter 2019-11 cut it from 85% to 80% for case numbers assigned on or after September 1, 2019. Old numbers you see online may be out of date.
VA cash-out loans run far higher than conventional ones. A veteran must hold a Certificate of Eligibility, meet credit and income standards, and live in the home, per VA.gov. A VA cash-out can also move a non-VA loan into a VA-backed one. Some lenders set a tighter limit of their own, and that is lender policy, not VA policy.
Streamlines Do Not Pull Cash
The FHA Streamline and the VA IRRRL are for existing government loans. Neither has an equity test, and neither is a way to take cash out. The FHA Streamline requires a current FHA loan and a net tangible benefit, which means the refinance has to leave you better off in a measurable way. The IRRRL carries a 0.5% funding fee unless exempt, no VA appraisal, and seasoning of the later of 210 days and six payments.
Second Homes and Rentals
Occupancy changes the answer. Conventional cash-out on a second home or investment property caps at 75%, below the 80% you get on a home you live in. VA is stricter in the other direction, since it requires owner occupancy.
The Wholesale Lane Above 80%
Here is a case that surprises people. One lane placed through wholesale lenders reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% total ratio, a thirty-year fixed rate, a primary residence, a conforming loan amount, and its own six months of seasoning. It is not a loophole for everyone. It is a narrow program with tight boxes, subject to lender guidelines and full file review.
Homes With No Mortgage
A home owned free and clear is not exempt. A new loan on a property with no mortgage lien is treated as a cash-out refinance, and the 80% cap still applies. Equity of 100% does not mean 100% cash.
State Limits
Some states add their own limits on borrowing against a home. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, and the wholesale lane above is not written there.
What Lenders Check Besides Equity
Equity opens the door. It does not walk you through it. A cash-out goes through full underwriting.
- Credit score. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files.
- Debt-to-income. The total ratio ceiling is 50% on most automated files. Manually underwritten loans use 36% or 45%.
- Reserves. For automated files with a ratio above 45%, six months of reserves are required, per the Fannie Mae Selling Guide.
- Credit events. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
- Pricing. Higher LTV and lower scores cost more. The loan-level adjustments are published by score and LTV, and a high-LTV cash-out sits at the expensive end.
The Waiting Period: Can You Refinance Right After Buying?
Not usually. The same Selling Guide section sets seasoning rules on conventional cash-outs:
- The first mortgage being paid off must be at least 12 months old, counted note date to note date.
- At least one borrower must have been on title for six months before the new loan funds.
- If the home was listed for sale, it must come off the market by the time the loan funds.
Exceptions exist. There is no waiting period if you acquired the home by inheritance or were legally awarded it in a divorce or separation. A delayed financing exception covers some cash purchases. A buyout of a co-owner under a legal agreement also escapes the 12-month rule.
Seasoning is the quiet killer of fast plans. (Homeowners who buy and want to “pull the equity out” a few months later tend to learn this the hard way.)
If You Do Not Have Enough Equity
You have three honest paths.
Wait. Equity grows two ways: you pay down the balance, and the home gains value. Paydown is slow in the early years of a loan. Appreciation is not something you control. If your room is thin, waiting on a bigger cushion is often cheaper than refinancing at the margin.
Pick a different product. If your goal is a lower payment or a shorter term and not cash, a rate-and-term refinance needs far less equity. If you want cash and keep a loan you like, a separate second loan may fit.
Shrink the ask. A smaller cash target can fit inside the room you have. Plan for the appraisal to come in a little low.
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 share of your home’s value that you own, equal to value minus the debts against it.
Loan-to-value (LTV): The loan balance divided by the appraised value, shown as a percentage.
Combined LTV: LTV counting every loan on the home, including a second mortgage or line of credit.
Seasoning: The waiting period a lender wants before you refinance, measured from when you got the loan or the title.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with only small cash back.
Net tangible benefit: A test on government streamlines that requires the refinance to leave you measurably better off.
Reserves: Savings left after closing, counted in months of payments.
Frequently Asked Questions
Can I cash out if I have exactly 20% equity?
Not in any useful way. At 20% equity you already sit at the 80% line, so the new loan can only match what you owe. Any cash would come from the other side of the line, and the program does not allow it. You need more than 20% to have room.
Does a HELOC count against my equity?
Yes. On conventional loans, a second lien that stays on the home counts toward combined LTV. If you pay it off in the refinance, it comes out of your cash instead. Either way, a HELOC balance shrinks what you can take.
How long do I need to own the home first?
On a conventional cash-out, one borrower must be on title for six months. The loan being paid off must also be at least 12 months old. Inheritance, a divorce award, delayed financing and some buyouts have exceptions.
Is the limit the same for FHA and VA?
No. FHA cash-out caps at 80% of Adjusted Value, which matches conventional on a home you live in. VA runs far higher but requires eligibility and owner occupancy. Streamline loans on either side do not release cash at all.
What if the appraisal comes in lower than I expected?
Cash drops fast. A small miss on value cuts the maximum loan, while your payoff stays fixed, so the gap between them narrows. In some cases it closes and the cash-out falls apart. Plan with a cushion rather than the best-case figure.
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 details 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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. CFPB, Using Your Home Equity guide
2. Fannie Mae Eligibility Matrix
3. HUD Mortgagee Letter 2019-11
4. VA.gov, Cash-Out Refinance Loan
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
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: Can You Pull Equity From a Vacation Home With a Cash-Out Refinance? · How Much a Vacation Condo Cash-Out Refinance Releases · Cash-Out Refinance Reserves for a Vacation Home Owner
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.