The Quick Read: Usually 20% on a conventional loan against a one-unit primary home, because the standard cash-out cap is 80% loan-to-value. The cap is 75% on two- to four-unit primary homes, second homes and investment property, so the equity you keep rises to 25%. The cap applies to the whole new loan, not just the cash you receive, and it is measured against the appraised value, subject to lender guidelines and full file review.
What “Equity You Must Keep” Means
Equity you keep is the mirror image of the maximum loan-to-value ratio (LTV). If the cap is 80%, you keep 20%. If the cap is 75%, you keep 25%.
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.
The test works like this: the new loan, plus any lien that stays on the home, divided by the appraised value. Lenders call that combined loan-to-value. The result has to land at or under the cap.
Two points trip people up. First, the cap limits the total debt on the home. It does not mean you can take 80% of your value as cash. Second, the value is the appraiser’s number, not your estimate and not an online estimate.
The federal consumer-finance regulator’s consumer guide on using home equity says lenders typically want you to keep at least 10% to 20% of your home’s value as equity. That is a broad range across products. For a conventional cash-out refinance, the figures below are tighter.
What Are the Equity Limits by Loan Type?
On a conventional cash-out refinance, a one-unit principal residence is capped at 80% LTV, which means you keep 20%. Two- to four-unit principal residences, second homes and investment property are capped at 75%, so you keep 25%. The Fannie Mae Eligibility Matrix lists these limits by occupancy and transaction type. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
| Property and use | Max LTV on cash-out | Equity you keep |
|---|---|---|
| One-unit primary home | 80% | 20% |
| Two- to four-unit primary home | 75% | 25% |
| Second home | 75% | 25% |
| Investment property | 75% | 25% |
Occupancy decides the leverage: anything other than a one-unit primary home sits at the lower 75% cap.
Some details move the number:
- Manufactured housing. On a principal residence, the Fannie Mae matrix caps cash-out at 65%, as the agency’s eligibility matrix shows. That means you keep 35%.
- FHA cash-out. HUD cut the FHA cash-out limit from 85% to 80% for case numbers assigned on or after September 1, 2019. Older articles and archived pages still show 85%. That number is stale.
- VA cash-out. The VA allows far less equity to remain than conventional or FHA, but many lenders set their own caps below what the VA permits. VA.gov also requires a Certificate of Eligibility and that you live in the home.
- Lender overlays. A lender can set a tighter limit than the program allows. On most files across the wholesale programs Lendmire places with, 80% is the standard conventional cash-out cap, and individual lenders can set it lower.
One wholesale lane goes past that standard cap. It reaches 89.99% LTV with no mortgage insurance on a primary residence. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a conforming balance and its own six months of seasoning. It is the exception, not the standard, and it is not written in Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Why Is the Cap Not the Same as the Cash You Get?
The cap limits the new loan. The cash is what is left after everything else comes out.
Build the new loan in order:
1. Start with the payoff of your existing first mortgage.
2. Add any lien that must be paid off in the same transaction.
3. Add closing costs and any fees you finance.
4. Whatever room is left under the cap is the most cash you can receive.
Because closing costs and financed fees sit inside the loan, they eat into your cash first. They also reduce the equity you keep, since a bigger loan means a smaller cushion.
Here is a plain-language example with no dollar figures. Say your home appraises at 100 units of value and you owe 60 units. At an 80% cap, the new loan can reach 80 units. Subtract the 60-unit payoff, and the most you could take is 20 units, before costs. If costs and financed fees run 2 to 3 units, your cash is closer to 17 or 18. You would keep 20 units of equity, exactly the cushion the cap leaves.
Now run it on a lower appraisal. If the same home appraises at 90 units, the cap allows a 72-unit loan. With the 60-unit payoff, only 12 units of room remain before costs. A small appraisal gap changes both your cash and your cushion.
Does a Second Mortgage or HELOC Count?
Yes. Any second lien that stays on the home counts in the combined LTV. If you keep a HELOC, it uses up room under the cap before you see a dollar of cash.
You have two ways to handle it:
- Pay it off in the new loan. That lowers your cash, but it clears the room.
- Keep it and have it re-subordinated. The second lienholder must agree to sit behind the new first mortgage. That is another document to collect and another party that can slow the file.
One more wrinkle. Paying off a second lien that was not used to buy the home turns a refinance into a cash-out refinance. The label depends on what the loan does, not on what you intended.
What Seasoning and Title Rules Apply?
Under Fannie Mae’s cash-out rules, the first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for six months before the new loan disburses.
There are named exceptions to the ownership wait: delayed financing, inheritance and a property legally awarded in a divorce. Each has its own paperwork. Delayed financing, for example, needs the original settlement statement showing the purchase used no mortgage financing. Confirm the current guide wording before relying on an exception.
A mistake seen often is a borrower who bought recently, got a bigger appraisal, and assumes cash is available. It may not be. Seasoning is a separate test from equity, and files that skip it get sent back.
How Is This Different from a Rate-and-Term Refinance?
A rate-and-term refinance, called a limited cash-out refinance, allows much higher leverage because it only pays off the existing first mortgage, the closing costs and a purchase-money second lien. Only incidental cash comes back. On a one-unit principal residence the wholesale programs go to 95% LTV, and to 97% where the existing loan is agency-owned and the first-time-buyer program allows. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
That means you could keep as little as 5% equity on a rate-and-term refinance in the standard case, and as little as 3% in the 97% case, versus 20% on a one-unit primary-home cash-out. The trade-off is that you do not receive meaningful cash. Mortgage insurance applies above 80% LTV on these loans. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The government streamlines are a different tool. The FHA Streamline and the VA IRRRL refinance an existing FHA or VA loan with limited documentation. Neither gives you cash, so the cash-out cap does not apply to them. For borrowers who want to see how the cash-out lane compares, Lendmire’s cash-out refinance programs page lays out the options.
What Happens When the Cushion Is Thin?
A thin cushion costs you in three ways.
Mortgage insurance. On a conventional loan it applies above 80% LTV, with the exception of the one wholesale lane noted above that reaches 89.99% without it. You can ask to cancel it at 80% of the original value, with a good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%. Published typical annual premiums range from 0.58% to 1.86% of the balance. That is a range, not a quote. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Pricing. Cash-out loans generally carry higher loan-level adjustments than rate-and-term loans, and higher leverage usually adds to that. Your lender sets the final figures.
Downside risk. If values dip, a small cushion can disappear. Taking equity out means you own less of the property, and it takes time to rebuild that stake. You also net less if you sell.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Should You Keep More Than the Minimum?
Often yes. The cap is the lender’s floor, not your safe level.
Think through three questions:
- How stable is your income? If it can swing, a bigger cushion helps you ride out a bad stretch.
- How long will you stay? A short stay in a flat market leaves little room if you must sell and pay costs.
- Do you need all the cash? Taking less keeps the balance lower and the cushion wider.
A common middle path is to borrow only what a specific need requires. Leaving the cap unused costs you nothing, and it keeps your options open.
If You Are Short on Equity
If the numbers do not work, you have a decision path:
1. Check the appraisal. If value came in low, ask whether recent comparable sales support a reconsideration request.
2. Reduce the draw. A smaller cash amount may fit under the cap.
3. Pay down the balance or a second lien. That restores room.
4. Look at a rate-and-term refinance. If your goal is a different loan, not cash, the higher leverage may fit.
5. Wait. Time and payments build equity, and seasoning clocks keep running.
6. Compare another program. FHA and VA have different caps and rules, and the VA has its own eligibility tests.
Key Terms Defined
Loan-to-value (LTV): the new loan divided by the appraised value of the home.
Combined LTV: the new loan plus any lien that stays on the home, divided by the appraised value.
Seasoning: the minimum time you must have owned the home or held the loan being paid off.
Limited cash-out refinance: a refinance that pays off the first mortgage and costs and returns only small amounts of cash, also called rate-and-term.
Lender overlay: a rule a lender adds on top of the program’s own limits.
Frequently Asked Questions
Can I keep less than the usual 20% on a cash-out refinance?
On a conventional one-unit primary home, the standard cap is 80%, so 20% is the usual floor. One wholesale lane reaches 89.99% LTV on a primary residence, but it needs a 680 score, a 50% ratio, a thirty-year fixed rate and a conforming balance. VA rules allow less equity to remain, though many lenders set their own caps. All of it is subject to lender guidelines.
Do closing costs count against my equity?
Yes, if you finance them. They are added to the new loan, which raises the LTV and shrinks both your cash and your cushion. Paying them out of pocket keeps the loan smaller.
What if my appraisal comes in low?
The cap is applied to the appraised value, so a lower value cuts the maximum loan. Your cash shrinks, and in some cases disappears. You can ask about reconsideration with better comparable sales, reduce the amount you want, or wait.
Is the equity rule the same for a second home?
No. A second home is capped at 75% on a conventional cash-out, so you keep 25%. Occupancy decides the leverage.
Does an FHA Streamline or VA IRRRL give me cash?
No. Both refinance an existing government loan with limited documentation and no cash-out feature. If you want cash from an FHA loan, that is a full cash-out refinance with an appraisal, and the limit is 80%.
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 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.
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References
1. CFPB’s consumer guide on using home equity
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Eligibility Matrix (PDF)
4. HUD press release on the FHA cash-out limit
5. VA.gov cash-out refinance page
6. Fannie Mae Selling Guide B2-1.3-03
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 Your Income Supports on a Cash-Out Refinance · Cash-Out Refinance vs Lower Payment Refinance for Owners With Equity · Cash-Out Refinance for First-Time Refinancers: Turning Equity Into Cash
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.