The Quick Read: The lender and outside vendors set the closing costs on a cash-out refinance. So the dollar total on a $400K home depends on the Loan Estimate you receive, not on a fixed percentage. The part that surprises most owners is how those costs interact with the 80% loan-to-value cap. Every fee you finance comes out of the same limit as your cash.
Key Takeaways
- A conventional cash-out refinance replaces your current mortgage with a new, larger one. You keep the difference as cash.
- On a one-unit primary residence, the new loan can reach 80% of the appraised value. That cap covers the payoff, any other liens, financed fees and your cash.
- Cash-out loans carry a price adjustment that a plain rate-and-term refinance does not. It is built into the loan’s pricing rather than shown as a line named for it.
- Paying costs in cash keeps the balance lower. Financing them keeps cash in your pocket but shrinks your net proceeds once you sit at the cap.
- No agency publishes a “typical” closing-cost percentage for this loan. Compare Loan Estimates line by line.
What Counts as a Closing Cost on a Cash-Out Refinance?
Closing costs are the one-time charges to originate and complete the new loan. They are the lender’s own charges, the third-party services the lender orders, and the government fees to record the new lien. Prepaid items and escrow deposits show up on the same statement, but they are a different animal.
A cash-out refinance, per the Fannie Mae Selling Guide, pays off the existing mortgage with a new first mortgage on the same property. It can also place a new first mortgage on a home owned free and clear.
Here is the cost stack, broken into categories rather than prices:
| Category | Who gets paid | Can you shop it? |
|---|---|---|
| Lender charges | The lender | Compare across offers |
| Appraisal | Appraiser | Lender usually orders it |
| Title and settlement | Title or closing agent | Often, in many places |
| Recording and transfer | Local government | No |
| Credit report, flood certificate | Vendors | Rarely |
| Prepaids and escrow deposits | Tax, insurance, interest | Amounts follow your home |
No source gives a clean “typical percentage” for this loan, so this article does not invent one. Lendmire’s cash-out refinance programs run through wholesale lenders. Each lender sets its own charges, and your Loan Estimate is the only number that counts.
The “$400K” in the title also needs a definition. Here it means the appraised value of your home. The new loan will be a percentage of that, not $400K itself.
The Hidden Cost: Why Cash-Out Loans Price Higher
A cash-out loan costs more than a rate-and-term refinance of the same size, and the reason is a price adjustment. Fannie Mae charges a loan-level price adjustment on many cash-out refinances. It grows as your loan-to-value climbs and falls as your credit score rises.
You will not see a line labeled with that name. The lender passes it through in one of two ways. Either your interest rate is higher, or you pay an upfront charge at closing. Both routes cost you money, just in different places.
So two Loan Estimates with the same fee total can still be different deals. Look at the rate, the points and the lender charges together.
There is a narrow exception. Fannie Mae waives the cash-out price adjustment for loans that meet its student loan cash-out refinance requirements. Those requirements are strict, and they spell out how the payoff must work.
How Much Cash Can You Actually Take Out?
The cap does the work here. Per the Fannie Mae Eligibility Matrix, a one-unit primary residence can reach 80% loan-to-value on a cash-out refinance. Two- to four-unit principal residences and second homes top out at 75%. For contrast, the limited cash-out category (more on it below) reaches much higher.
The cap applies to the whole new loan, not just to your cash. A common mix-up is “I can borrow 80% of my equity.” You cannot. You can borrow up to 80% of the home’s value in total.
Net cash is simple arithmetic:
1. Take the appraised value times the cap.
2. Subtract the payoff on your current mortgage.
3. Subtract any other liens you must pay off.
4. Subtract financed closing costs and prepaids.
What remains is yours.
Run it with modeled percentages. Say your home appraises at the title’s $400K and you owe 50% of that value. At the 80% cap you have room for 30% of the value before fees. Financed costs come off that 30%, point for point. Cash in hand ends up smaller than the headline.
Now say you owe 70% of the value. The room before fees is 10% of the value. Even a modest cost stack takes a visible bite. A third owner at 75% owed has 5% of room, and costs could swallow much of it.
That is why the appraisal matters so much. It is the denominator in the cap, so a low appraisal shrinks the maximum loan and your cash with it. A lower value cuts your room one-for-one, and the fees stay put.
Pay in Cash, Finance, or Take a “No-Cost” Loan?
You have three ways to handle the costs. Each one moves the money somewhere else.
| Approach | Loan balance | Cash to you | Where the cost lands |
|---|---|---|---|
| Pay at closing | Lower | Full, minus what you pay | Your savings now |
| Finance into the loan | Higher | Reduced at the cap | Balance, over time |
| “No-cost” loan | Same or higher | Not reduced up front | Rate or balance |
On a “no-cost” loan, a lender credit offsets the fees. The lender funds that credit through pricing, so the costs move into the rate or the balance. They do not disappear. Treat the phrase as marketing shorthand, then check the Loan Estimate to see where the money went.
Financing costs also matters for your budget. A larger balance means a larger monthly payment, and the new first mortgage replaces the old one, often at a different rate. The payment can rise even if the fees are modest. Escrowed taxes and insurance sit inside that payment.
How the Loan Is Underwritten, Step by Step
On the files Lendmire places through wholesale lenders, the sequence is consistent from lender to lender. Here is how a conventional cash-out refinance moves.
1. Application and Loan Estimate. The lender gives you a Loan Estimate. The federal Consumer Financial Protection Bureau explains that it shows estimated closing costs, the estimated cash to close and the monthly payment. Compare these across lenders.
2. Eligibility screen. The lender checks several time-based rules. The first mortgage you are paying off must be at least 12 months old, counted from note date to note date. At least one borrower must have been on title for six months. The home must be your primary residence if you want the 80% cap. If the property was listed for sale, it must be off the market by the time funds are disbursed.
3. Appraisal. A new appraisal sets the value.
4. Underwriting. Wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total debt-to-income ceiling of 50%. A manually underwritten loan runs tighter, at 36% or 45%, with reserve and score factors from the Eligibility Matrix. Where the automated system finds debt-to-income above 45%, Fannie Mae requires six months of reserves on a cash-out refinance. That trigger matters most when you are rolling debts into the new loan.
5. Closing Disclosure. Under the CFPB’s Closing Disclosure rules, the lender must deliver it before closing, with timing that varies by file and lender. Most changes afterward need only a corrected form. A new waiting period comes only if the APR becomes inaccurate, the loan product changes or a prepayment penalty is added. A bump in a fee does not restart the clock on its own.
6. Right of rescission. On a refinance of your primary residence, you have until midnight of the third business day to cancel. The CFPB’s rescission guidance says you can cancel in that window for any reason. Canceling does not erase your old loan. You still owe it. In practice, cash proceeds generally are not available until the window ends. Do not schedule a contractor’s deposit for the day you sign.
Program details change, so every figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
One Lane Worth Knowing: 89.99% With No Mortgage Insurance
Some wholesale lenders offer a cash-out lane that reaches 89.99% loan-to-value with no mortgage insurance. It is narrow. It requires a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming loan balance. It also carries its own six months of seasoning. In Texas, a cash-out on a homestead is capped by the state constitution below this lane’s loan-to-value, so this lane is not written there. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
For most owners, the standard 80% cap is the box. Mortgage insurance, in general, applies above 80% loan-to-value. You can request cancellation at 80% of the original value, and the servicer must end it automatically at 78%. Published typical annual premiums run from 0.58% to 1.86% of the balance. That is a range, not a quote.
Where the General Rule Breaks
Most files fit the steps above. These do not.
Delayed financing. You bought with cash and want your money back out. The six-month title rule does not stop you if the purchase was arm’s length and the settlement statement shows no mortgage was used. Inheritance and legal-award exceptions also exist. Confirm the current wording with your lender.
Revocable trust. Time held in a revocable trust can count toward the six months, if you are the primary beneficiary.
Delinquent taxes. Property taxes more than 60 days delinquent cannot be financed unless an escrow account is set up. The exception is where law does not allow requiring one.
Limited cash-out versus cash-out. If you only need to pay off the old loan and the closing costs, you may qualify for a rate-and-term refinance. That is also called limited cash-out. On a one-unit primary residence it reaches 95% loan-to-value. It reaches 97% where the existing loan is agency-owned and the first-time-buyer program allows it. The catch is that only incidental cash comes back. Ask for more, and the loan can slide into the cash-out box, with the lower cap and the extra price adjustment.
Manufactured housing. Fannie Mae’s matrix says single-width manufactured homes are not eligible for cash-out refinance.
Fannie Mae lists HomeStyle Refresh as ineligible for cash-out. If your goal is a remodel, ask which product fits before assuming it is a standard cash-out.
Energy-lien payoffs. If cash-out proceeds pay off a PACE obligation, it must be paid in full, and the new loan must meet the cash-out requirements.
Rental use. If the home is a second home, the cap is 75%. If it is an investment property, it falls under different programs, and occupancy decides the leverage.
In high-cost areas, loan limits are more likely to come into play.
What Moves Your Closing Costs Up or Down
Four things push the total toward the high end or the low end.
- Loan size. Many charges scale with the balance, so a larger loan tends to cost more in absolute terms.
- Credit score and loan-to-value. These set the price adjustment. A higher score and a lower loan-to-value reduce it.
- Points. Buying points raises upfront cost and lowers the rate. That trade only pays off if you keep the loan long enough.
- Location. Title charges, recording fees and transfer taxes differ by state and county. Some states use attorneys at closing, which changes the bill.
The Consumer Financial Protection Bureau’s 2024 request for information on closing costs says total loan costs have risen sharply. Its figure was a rise of more than 36% in median total loan costs from 2021 to 2023. That data covers purchase loans, not cash-out refinances, but it shows why comparing offers matters.
What the Decision Looks Like in Practice
Start with a plain question: do you need cash, or do you only want a different loan?
If you need cash, work backward. Estimate the value, apply the 80% cap, subtract your payoff, and see what is left before costs. If that leftover is thin, the costs will take a large share of it. A small cash need at high leverage is usually a poor fit for a full cash-out loan.
If the loan fits, request Loan Estimates from more than one lender and compare them side by side. Check the rate, the points, the lender charges and the estimated cash to close together. Then decide whether to pay costs in cash or finance them. Financing is easier on day one but cuts your proceeds and raises the balance you carry.
Think about timing, too. The rescission window means you will wait for your funds. And think about the horizon. Costs and price adjustments are paid once, but the larger balance stays with you as long as the loan does. A borrower planning to sell within a few years should weigh that carefully.
On the files Lendmire sees, the cleanest cash-out refinances share two traits. The borrower had real room under the cap, and the cash had a specific job. The messy ones involved a vague plan and a tight appraisal.
Key Terms Defined
Loan-to-value (LTV): The new loan balance divided by the home’s appraised value, shown as a percentage.
Loan-level price adjustment (LLPA): An agency pricing charge based on credit score and loan-to-value. Lenders pass it through in the rate or in points.
Seasoning: The minimum time you must have owned the home, or held the loan being paid off, before refinancing.
Prepaids: Items you pay ahead at closing, such as the first insurance premium, property taxes and interest up to the first payment.
Lender credit: A credit that offsets closing costs. The lender funds it through pricing, so the cost moves into the rate or balance.
Rate-and-term refinance: A refinance that replaces your loan without taking meaningful cash out. Also called limited cash-out.
Next Step
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 also covers the line items in cash-out refinance closing costs on a conventional loan.
Frequently Asked Questions
Can I roll closing costs into a cash-out refinance?
Usually, yes, as long as the total new loan stays under the cap. Financed costs count toward the 80% limit on a one-unit primary residence. Each financed dollar reduces your net cash by a dollar once you are at the cap. It also raises the balance you owe.
Do prepaids and escrow deposits count as closing costs?
They appear on the same statements, but they are a separate bucket. Prepaids are items like taxes, insurance and interest paid in advance. Escrow deposits start your tax and insurance account. Both are real cash due at closing, so include them when you total your cash to close.
Why does a cash-out loan cost more than a rate-and-term refinance?
The price adjustment is the main reason. Fannie Mae applies it to many cash-out loans, and it rises with loan-to-value. Lenders pass it through as a higher rate or as points. The origination work may be similar, but the pricing is not.
Will I need mortgage insurance on a cash-out refinance?
Not at the standard 80% cap, since mortgage insurance applies above 80% loan-to-value. A narrow wholesale lane reaches 89.99% with no mortgage insurance at a 680 score and a 50% ratio. It is limited to primary residences on thirty-year fixed loans, and it is not written in Texas.
Are closing costs on a refinance tax-deductible?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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 Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. CFPB, Loan Estimate explainer
4. CFPB, What is a Closing Disclosure?
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Conventional Cash-Out Refinance Costs for a Primary Home · Is a Conventional Cash-Out Refinance Worth It for Your Home? · Can You Use a Conventional Cash-Out Refinance on a Paid-Off Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.