The Quick Read: The lender sets a cap, called the loan-to-value (LTV) limit, as a percentage of what your home appraises for. On a conventional loan for a one-unit home you live in, that cap is 80%. Your old mortgage, any other liens you pay off, and your costs come out of that cap first. What is left is your cash.
Key Takeaways
- The cap applies to the total new loan, not to the cash you take. Eighty percent of value is not 80% of your equity.
- Cash to you equals the maximum loan, minus the payoff of the old mortgage, minus other liens being cleared, minus financed costs.
- The appraisal is the number that moves your result most. A lower value shrinks the maximum loan, and the cash with it.
- Occupancy and unit count change the cap. A home you live in gets the highest leverage.
- A rate-and-term refinance is a different product. It allows only a small amount of incidental cash back.
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 “Lending Against Your Home’s Value” Actually Mean?
The lender measures one thing: the new loan balance against the appraised value of the home. If the new loan would be more than the cap allows, the loan does not fit the program. The lender is not measuring your equity. It is measuring how much of the home’s value it will fund.
Picture the home as a stack. At the bottom sits the share of value the lender will not touch. Above that sits the loan you owe today. At the top sits the room left under the cap. A cash-out refinance fills that top layer with new borrowing and hands it to you.
The new loan replaces your whole first mortgage. That detail surprises people. The new terms apply to the entire balance, not only to the cash portion. Across the wholesale programs Lendmire places consumer files with, that reset is the part borrowers weigh most carefully. They are trading the loan they have for a new one.
You can see the program side of this on Lendmire’s cash-out refinance programs page.
Key Terms Defined
Appraised value: the opinion of value from a licensed appraiser that the lender uses as the denominator of the LTV ratio.
Loan-to-value (LTV): the new loan balance divided by the appraised value, shown as a percentage.
Combined loan-to-value (CLTV): the total of all loans secured by the home divided by its value. A second lien that stays on the home counts here.
Equity: what the home is worth minus what you owe on it.
Limited cash-out (rate-and-term) refinance: a refinance that pays off the first mortgage and costs and returns only a small amount of incidental cash.
Seasoning: the minimum time you must hold the home or the existing loan before a lender will count it for cash-out.
Mortgage insurance: a policy the borrower pays for that protects the lender when the loan is above 80% of value. It is a feature of higher-leverage loans.
How Does the Formula Work, Step by Step?
The formula is short: appraised value × maximum LTV − what must be paid off − financed costs = cash to you. Each piece has a reason behind it.
1. The appraisal sets the value. The lender does not use your purchase price or an online estimate. It uses the appraised figure.
2. The program sets the percentage. For a conventional loan on a one-unit principal residence, the cap is 80%. The Fannie Mae Eligibility Matrix lists the maximum by transaction type, occupancy and unit count.
3. Multiply to get the maximum loan. This is the ceiling for the whole new balance.
4. Subtract the payoffs. The first mortgage goes first. Any other lien you are clearing comes next. A home equity line or second mortgage you keep still counts against the limit.
5. Subtract financed costs. Closing costs and prepaid items that you roll into the loan use up room under the cap.
6. What remains is yours. If the number is zero or negative, there is no cash-out on that file.
Working in percentages of value keeps this concrete. Take a home you live in, one unit, with the cap at 80%. Say your first mortgage is 55% of the appraised value and you have a second lien at 5%.
| Step | Share of appraised value |
|---|---|
| Maximum new loan | 80% |
| Minus first-mortgage payoff | 55% |
| Minus second lien paid off | 5% |
| Minus financed costs | Varies by loan |
| Cash to you, before costs | 20% |
That 20% is a ceiling, not a promise. Costs shrink it. Your credit, income and payment capacity can also limit it, which a later section covers.
What Does It Look Like Across Different Balances?
The easiest way to find yourself is to start with how much of the home’s value you still owe. This table shows the room under the cap, before costs, for a one-unit home you live in (80% cap) and for a two- to four-unit home you live in (75% cap).
| Balance owed, as % of value | Cash room at 80% cap | Cash room at 75% cap |
|---|---|---|
| 40% | 40% | 35% |
| 50% | 30% | 25% |
| 60% | 20% | 15% |
| 70% | 10% | 5% |
| 75% | 5% | 0% |
| 80% or more | 0% | 0% |
Read across your row. If you owe 70% of value, you have equity of 30%. Yet the cash room is only 10%. That gap is the “I have equity, why can’t I take it?” problem. The lender keeps its cushion, and the payoff comes out first.
Why Does the Appraisal Decide So Much?
Because it is the one number in the formula that you do not control. The cap is fixed by the program. Your balance is fixed by your statement. Only the value can move.
Suppose you expected the home to appraise at a certain level, and your balance is 60% of that expected value. At the 80% cap, you would expect cash room of 20%. Now say the appraisal comes in 5% lower. The maximum loan falls to 76% of your expected value, so the cash room falls to 16%. A 5% miss on value costs you a fifth of your cash.
A lender cannot raise the program cap to rescue that result. The cap is a program rule. A lender may add stricter rules of its own, called overlays, but it cannot loosen the agency limit. If the number disappoints, your options are to take less cash, wait, or ask the lender whether a review of the appraisal is possible.
What Changes the Percentage?
Three things change the cap: how you use the home, how many units it has, and the type of structure. Here is how the conventional cash-out caps stack up for the loans Lendmire arranges.
| Property use | Conventional cash-out cap |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
| Investment property | 75% |
A manufactured home you live in carries a lower cap than these, per the Fannie Mae Eligibility Matrix.
If your question is really about a second home, occupancy sets the leverage, and Lendmire’s piece How Much a Cash-Out Refinance Lends on a Paid-Off Second Home covers it.
Where Does the Rule Break? Edge Cases Worth Knowing
The 80% figure is a rule of thumb. These situations bend it.
Limited cash-out versus cash-out. A rate-and-term refinance can reach 95% LTV on a one-unit home you live in, and 97% where the existing loan is agency-owned and the first-time-buyer program allows it. The trade is that cash back is tightly capped. The Fannie Mae Selling Guide describes the cash-back cap as a small amount and lists what the loan may pay: the old mortgage, closing costs and prepaids. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Paying off a second lien can flip the category. If your refinance clears a second mortgage that was not part of the original purchase financing, the lender treats the loan as cash-out. The cap then drops from the rate-and-term level to the cash-out level. Many owners with an old equity line get caught here.
Seasoning. For a conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted from note date to note date. You must also be on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
FHA. HUD cut the FHA cash-out cap so it lines up with Fannie Mae and Freddie Mac, as its announcement explains. Older articles still show the higher figure. FHA county loan limits can also cap the loan before the percentage does.
VA. A VA cash-out replaces your current loan, and it can turn a non-VA loan into a VA-backed one. VA.gov says you need a Certificate of Eligibility, you must live in the home, and you apply through a private lender. The page does not state an LTV figure. VA allows more leverage than conventional or FHA, and individual lenders may set lower limits.
Streamlines. The FHA Streamline and the VA IRRRL are refinances of an existing government loan. They are built for a better payment or term, not for taking cash out of value. Only narrow, small exceptions exist.
Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. The wholesale no-mortgage-insurance lane described below is not written there.
Suspended high-LTV products. The matrix notes that the agency’s high-LTV refinance program is suspended. Don’t plan around an old “100% refinance” ad.
Can a Cash-Out Go Above 80%?
There is one lane that goes higher. Across the wholesale programs Lendmire works with, a cash-out lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% total ratio. The loan must be a thirty-year fixed on a primary residence, with a conforming balance. It carries its own six months of seasoning. It is subject to lender guidelines and full file review, and it is not available in every state.
Conventional loans above 80% usually carry mortgage insurance. You can ask to cancel it at 80% of the original value if you have a good payment history, no subordinate liens, and no decline in value. The servicer must end it automatically at 78%. Typical annual premiums run from 0.58% to 1.86% of the balance. That is a published range, not a quote.
Does the Value Cap Always Decide Your Number?
No. The value cap is one ceiling. Two others can bind first.
Your credit and ratios. Wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, depending on the reserves and score factors. A bigger balance means a bigger housing payment and a higher debt-to-income ratio. You can have room under the value cap and still not have room in your budget.
Loan size limits. Conforming and FHA limits cap the loan amount. Above the conforming limit, jumbo lanes take over. Those start at a 660 decision score, reach 90% leverage, and go to $5,000,000, with a 50% ratio ceiling on the fixed lanes. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Waiting periods after credit events are agency rules. They run four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. They are shorter with documented extenuating circumstances.
In practice, the lowest of these ceilings wins. Borrowers focus on value because it is the easiest to estimate. The payment ratio is the one that surprises them.
How Does a Cash-Out Compare With a HELOC or Home Equity Loan?
A cash-out replaces your first mortgage. A home equity loan or HELOC sits behind it. That one difference drives the rest.
| Factor | Cash-out refinance | Home equity loan | HELOC |
|---|---|---|---|
| Position | Replaces first mortgage | Second lien | Second lien |
| What resets | Whole loan | Only the new piece | Only the new line |
| How cash arrives | One lump sum | One lump sum | Drawn as needed |
| Counts toward CLTV | Yes, total new loan | Yes | Yes |
If your current loan has terms you want to keep, a second lien leaves them alone. If you also want to change the term on the whole balance, the cash-out does both jobs in one loan. The CFPB’s guide to using home equity lays the options side by side. It also notes that lenders typically want you to keep a share of your home’s value as equity.
How Much Should You Actually Take?
Take what you need, not what the formula lets you. The maximum is a lender’s limit. It was never a recommendation.
Ask yourself four things:
- What is the money for? Home repairs add to the property. Paying down other debts is the most common stated reason in CFPB data, and it carries a trade-off.
- What does the new payment do to your budget? A larger balance changes the monthly housing cost and your debt-to-income ratio.
- What risk are you moving onto the house? A CFPB report on cash-out borrowers found their credit scores rose at first and then drifted down, though they stayed above pre-refinance levels. The same report cautions that paying non-mortgage debt with mortgage debt can raise foreclosure risk. Missing a credit card payment is unlikely to cost you the home. Missing the mortgage can.
- What cushion do you want left? At the 80% cap, about 20% of value stays as equity. A dip in home prices eats that quickly.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
How Do You Find Your Own Numbers Before You Apply?
Gather four figures before any conversation with a lender.
1. Your payoff amount. This is different from the statement balance. It includes interest owed through the payoff date. Your servicer can issue it.
2. Every other lien. List home equity lines, second mortgages and any recorded liens.
3. A realistic value. Use recent sales of similar homes nearby. Then shade it down a little, because appraisers tend to be conservative.
4. The age of your current loan and your time on title. Check these against the 12-month and 6-month seasoning rules above.
Run the formula with those numbers. Then compare your result against the balance table. If the cash room is thin, the refinance may not be worth the cost of closing.
After you apply, you will receive a Loan Estimate, then a Closing Disclosure. Compare them line by line. Your costs depend on the lender, and rolling them into the loan uses up room under the cap.
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. Reach the team at 828-256-2183.
Frequently Asked Questions
Is a cash-out refinance based on my home’s value or my equity?
It is based on value. The lender applies a percentage cap to the appraised value to set the maximum loan. Your equity matters only because it is what remains after your balance is subtracted from that maximum.
What happens if the appraisal comes in low?
The maximum loan shrinks, and so does your cash. The program cap does not move, so a lower value means less room. You can take less cash, wait for the value to rise, or ask the lender about reviewing the appraisal.
Do closing costs reduce the cash I receive?
Yes, when they are rolled into the loan. Financed costs use up room under the cap, so net cash is lower than the gross figure. You can also pay costs out of pocket and keep more room. The amounts depend on the lender.
Do a HELOC or second mortgage reduce what I can take?
Yes. The caps measure combined loans, so any second lien that stays on the home uses part of the limit. If the refinance pays that lien off, it is cleared from the stack. It may also change how the loan is classified.
Is the cap the same for every home?
No. The percentage depends on how you use the home, how many units it has, and the type of structure. A one-unit home you live in gets the highest conventional cash-out cap. Two- to four-unit homes, second homes and investment properties get lower ones.
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 that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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. HUD Archives: FHA cash-out refinance announcement
4. VA.gov: Cash-out refinance loan
5. CFPB’s guide to using home equity
6. 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 Equity Your Home Needs Before a Cash-Out Refinance · Can a Lender Allow Higher Loan-to-Value on a Cash-Out Refinance? · Can You Borrow From Family for a Cash-Out Refinance?
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
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.