The Quick Read: Usually up to 80% of your home’s appraised value on a one-unit primary residence, and 75% on a two- to four-unit primary residence, with the new loan paying off your old mortgage first. The cap applies to value, not to your equity. What lands in your account is the maximum new loan minus your payoff, any other liens and financed costs. Debt ratios, seasoning and the appraisal can all push the number lower.
The Formula in Plain Terms
The ceiling is a percentage of appraised value. Equity is not the base.
Fannie Mae’s Eligibility Matrix lists the cash-out cap at 80% for a one-unit principal residence and 75% for two to four units. Freddie Mac’s Guide Section 4203.1 sets the same figures. Any second lien that stays in place counts toward the cap.
The math runs in three steps:
1. Appraised value times the maximum LTV gives the maximum new loan.
2. Subtract the payoff of your existing first mortgage and any liens being paid off.
3. Subtract financed closing costs and prepaids. What remains is your cash.
Fannie Mae’s Selling Guide on cash-out transactions lets the new loan finance closing costs, points and prepaid items. It also lets you pay off subordinate liens of any age and use the proceeds for any purpose.
A Worked Example
Say your home appraises at a value where 80% of it leaves a clear gap above your current payoff. Take the 80% figure as the maximum new loan. Your old first mortgage balance comes off the top. If you owe about 50% of the home’s value, the gross room is roughly 30% of value. Financed closing costs shrink that further.
Now say the appraisal comes in lower than you expected. The cap shrinks with the value, and the payoff stays the same. A small drop in value can take a large bite out of your cash because the payoff is a fixed amount. That is why the appraised number, not your own estimate, drives the outcome.
Under the cap, 20% of the appraised value stays in the home. For a one-unit property, that is the cushion you keep.
What Else Can Lower the Number?
The LTV cap is one ceiling, not the only one. Across the wholesale conventional programs Lendmire places files with, these constraints most often cut the amount below the headline cap:
| Constraint | How it lowers the amount |
|---|---|
| Loan size limit | Conforming ceiling can bind before LTV |
| Debt-to-income | Ratio ceiling can reject or shrink the loan |
| Credit score | Floor and tighter terms as leverage rises |
| Seasoning | Clocks on the old loan and on title |
| Appraisal | Lower value, lower cap |
| Second lien | Counts inside the combined cap |
Loan size. FHFA publishes the conforming loan limits by county, with a higher ceiling in high-cost areas. On a high-value home, 80% of value can exceed the limit. Then the loan is not conforming, and jumbo guidelines set by each lender apply instead.
Debt ratios. Fannie Mae’s debt-to-income rules allow up to 50% on loans run through automated underwriting and 45% on manually underwritten loans. Cash-out files can face a lower ceiling in the automated system. The Eligibility Matrix also attaches reserve requirements to cash-out files with ratios above 45%. Across wholesale programs, the working ceiling is a 50% total ratio on most automated findings.
Credit. The wholesale conventional programs start at a 620 decision score, subject to lender guidelines. Requirements tighten as leverage rises. Some lenders add their own overlays on top of agency rules, so two lenders can return different answers on the same file.
Seasoning: The Clock Most People Miss
Seasoning is where otherwise clean files get kicked back. The loan you are paying off must be at least 12 months old, counted from the note date of the old loan to the note date of the new one. At least one borrower must also have been on title for six months before the new loan funds.
Exceptions exist. Delayed financing covers a home bought with cash, and the purchase must have been an arm’s-length transaction. Inheritance and legal-award situations, such as a divorce decree, have ownership exceptions too. The 12-month test does not apply to subordinate liens being paid off. Read the Selling Guide page before assuming an exception fits your file.
A paid-off home is not exempt from any of this. A new first mortgage on a home with no lien is still treated as cash-out, so the 80% cap applies.
Does the Property Type Change the Cap?
Yes. Occupancy and unit count move the ceiling.
| Property | Cash-out cap |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
| One-unit investment property | 75% |
Manufactured homes sit lower. The Eligibility Matrix shows 65% for a one-unit manufactured home, though older agency material conflicts with that. Treat it as a check-the-current-rules item before you plan around it.
Since you live in the home, the first two rows are the ones that matter for most readers.
A Wholesale Lane Above 80%
One wholesale lane on the network reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio and a thirty-year fixed rate. It is limited to a primary residence at a conforming balance and carries its own six months of seasoning. It is subject to lender guidelines and full file review. This is not a commitment to lend. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so this lane is not written there.
Plan around the standard 80% cap unless a lender confirms the higher lane fits your file.
Closing Costs: Pay Them or Finance Them?
You can pay closing costs out of pocket or finance them inside the cap. Financing them raises your balance and reduces the cash you receive. Paying them keeps the balance lower but takes cash up front.
The Loan Estimate shows projected costs and cash to close, and the Closing Disclosure shows the final figures, including payoffs and cash to you. The lender must send the Closing Disclosure at least three business days before closing. Compare the two documents line by line.
Should You Borrow the Maximum?
Not always. Taking the full ceiling leaves the thinnest equity cushion. If values fall, you have less room.
The CFPB’s research notes that converting other debts into mortgage debt secured by your home can put the home at risk of foreclosure if payments become unsustainable. Cash-out also draws down wealth you might want later.
A bigger balance usually means a bigger payment, and a cash-out replaces your whole first mortgage. A home equity loan or HELOC leaves your first mortgage in place and adds a second lien. That is a different tradeoff. Compare both before you decide, and borrow what you need, not what you can.
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
Appraised value: The value an appraiser assigns, which the lender uses to set the cap.
LTV (loan-to-value): The new loan divided by the appraised value.
CLTV: The combined balance of all liens divided by the appraised value.
Seasoning: The minimum time you must hold the old loan or the title before a cash-out.
Net proceeds: Cash left after payoffs, liens and financed costs.
Mortgage insurance: Coverage required above 80% LTV that cancels at 80% on request and ends automatically at 78%. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Common Mistakes
- Applying 80% to equity instead of to value.
- Using your estimate or your purchase price instead of the appraisal.
- Forgetting a second lien or a HELOC in the payoff stack.
- Ignoring the 12-month and six-month clocks on a recent purchase.
- Assuming the 50% ratio ceiling is always the limit.
- Assuming a paid-off home skips cash-out rules.
Before You Apply
Gather your current mortgage statement and any second-lien payoff figures. Write down your realistic home value and what you need the cash for. Know your note date and when you took title. Then ask for a Loan Estimate and check how much of the cap is left after payoffs and costs.
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. Lendmire’s cash-out refinance programs are arranged through wholesale lenders. For a deeper look at the cash side, see Lendmire’s piece How Much Equity a Conventional Cash-Out Refinance Releases.
Frequently Asked Questions
Is the 80% limit based on my equity?
No. It is based on appraised value. Multiply the value by 80% to get the maximum new loan, then subtract your payoff, other liens and financed costs. The remainder is your cash.
What happens if the appraisal comes in low?
The maximum loan falls with it. Your payoff stays the same, so the cash you receive drops by more than the value did. Appraisal reconsideration with recent comparable sales is an option your loan officer can review with you.
Can I do a cash-out soon after buying my home?
Usually not. The old loan must be at least 12 months old and a borrower must have been on title for six months. Delayed financing for cash purchases, inheritance and legal awards are named exceptions.
Do I need reserves?
It depends on the file. The Eligibility Matrix attaches reserve requirements to automated cash-out files with ratios above 45%. Exact amounts vary with the file, so check the matrix and lender guidelines. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Can a bigger home value push me over the limit?
Yes. If 80% of the value exceeds the county conforming loan limit, the loan is a jumbo and each lender sets its own rules.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Eligibility Matrix
2. Freddie Mac Guide Section 4203.1
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. FHFA Conforming Loan Limit Announcement
5. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Can a Condo Owner Get a Conventional Cash-Out Refinance? · Conventional Cash-Out Refinance Requirements for a Condo Building · Conventional Cash-Out Refinance Documentation for Each Borrower Type
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.