The Quick Read: A lender multiplies the appraised value by the loan-to-value cap, then subtracts everything that must be paid off or financed. What remains is your cash. On a one-unit primary home the cap is 80%. It covers every lien on the property, not only the new first mortgage, and it applies to the home’s value, not to your equity.
Key Takeaways
- Maximum new loan = appraised value × the LTV cap for your occupancy and unit count.
- Payoffs, junior liens and financed costs come out of that maximum first. The leftover is your cash.
- The appraisal sets the value. Your own estimate does not.
- Seasoning clocks (6 months on title, 12 months on the loan being paid off) are checked before any math.
- The smaller of the LTV cap and the conforming loan limit controls.
Key Terms Defined
LTV (loan-to-value): the new loan amount divided by the home’s appraised value.
CLTV / HCLTV: the same ratio, but counting other liens such as a second mortgage or home-equity line.
Payoff stack: the existing first mortgage plus any junior liens the new loan must retire.
Financed costs: closing costs, points and prepaids rolled into the new loan instead of paid in cash.
Gross vs. net cash: gross is what the cap leaves after payoffs. Net is what reaches you after financed costs come out.
Overlay: a lender rule stricter than the agency minimum.
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: 7.32% as of October 22, 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 Counts as a Cash-Out Refinance?
A cash-out refinance is a new mortgage that replaces your current one and is not limited to paying off the old loan and costs. Under the Fannie Mae Selling Guide, it covers two cases: a new first mortgage that pays off existing loans on the same property, and a new mortgage on a home with no lien at all. A paid-off home still counts as cash-out. Freddie Mac defines it as a mortgage with no specific restriction on how the proceeds are used.
Paying off a loan and taking only incidental cash is a different product, a rate-and-term or limited cash-out refinance. It carries a higher leverage ceiling, 95% on a one-unit primary home across the wholesale programs Lendmire works with. Ask for more than incidental cash and the loan is re-sized under the cash-out cap. The two products are not interchangeable.
Step Zero: The Gates a Lender Checks Before Any Math
Eligibility comes first. If a clock isn’t met, the sizing never starts.
- Loan age. The first mortgage being paid off must be at least 12 months old, measured note date to note date. That test does not apply to junior liens being paid off.
- Title. At least one borrower must have been on title for six months before the new loan is disbursed. Time in a revocable trust can count when the borrower is its primary beneficiary.
- Reserves. On automated Fannie Mae files with a debt-to-income ratio above 45%, six months of reserves are required.
- Listing. A home that was listed for sale must be off the market by disbursement.
The exceptions are narrow. Freddie Mac’s guide lists inheritance, legal awards and paying off a first-lien HELOC as exceptions to the six-month title rule. Cash buyers can use delayed financing, covered below.
How Does a Lender Size the Loan, Step by Step?
The answer is a fixed sequence. Across the wholesale files Lendmire arranges, the order never changes, and each step narrows the number.
1. Establish the value. The lender orders an appraisal. Freddie Mac states that cash-out requires a new appraisal and inspection report. Your sense of what the house is worth doesn’t enter the formula. Value drives everything downstream.
2. Apply the cap. For a one-unit primary residence, the Fannie Mae Eligibility Matrix lists 80%. Two- to four-unit primary homes and one-unit second homes sit at 75%. The Lendmire cash-out program parameters match: 80% on a one-unit primary home, 75% on two- to four-unit homes and second homes. Maximum new loan equals value times the cap.
3. Build the payoff stack. Subtract the existing first mortgage balance and any junior liens being paid off.
4. Subtract financed costs. Closing costs, points, prepaids and financed real estate taxes all sit inside the same cap. Every dollar rolled in reduces the cash you receive. Closing costs vary by lender and loan, so treat them as a real line item, not a rounding error.
5. Qualify the borrower. Income, assets, credit and debt-to-income all still apply. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a 50% total ratio ceiling. A lender may set tighter limits than these.
6. Resolve to a final loan amount. The lender confirms that the loan, after all liens, sits at or under the cap, then prices and discloses it.
What the arithmetic produces is gross cash. Net cash is whatever reaches you after financed costs. Both matter when you plan how to use the money.
A Running Example in Percentages
Take a one-unit primary home that appraises at 100 units of value. The cap gives a maximum new loan of 80 units. Say the existing first mortgage is 50 units and financed costs are 3 units. That leaves 27 units of cash, or 27% of the home’s value.
Now change the stack. If a second lien of 10 units is paid off in the same transaction, cash falls to 17 units. If that second lien stays in place, it still counts toward the combined cap. The new first mortgage can then only be 70 units, and cash drops by the same amount. Whether a junior lien is paid or left, it uses up cap room either way.
| Payoff stack | Cap room used before cash | Cash from the 80-unit cap |
|---|---|---|
| First lien only | 50 + 3 costs | 27 units |
| Second lien paid off | 60 + 3 costs | 17 units |
| Second lien stays | 10 stays + 50 + 3 | 17 units |
These are modeled units, not market figures.
Which Limit Actually Binds?
Three limits apply at once, and the smallest one wins.
- The LTV cap. Value times 80% on a one-unit primary home.
- The conforming loan limit. FHFA sets a baseline limit for one-unit homes, with a higher ceiling in designated high-cost areas.
- The appraisal. A low value shrinks the cap’s dollar result immediately.
On a high-value home, the loan limit may bind before the percentage does. On most homes, the cap binds. Above the conforming limit, jumbo programs take over with their own rules.
Solving Backward: How Much Value Do You Need?
Start with the cash you want. Add the payoff stack and the financed costs, then divide by the cap. That gives the minimum appraised value the loan needs.
With a one-unit primary home, the divisor is 0.80. If you want 20 units of cash against a 50-unit payoff and 3 units of costs, you need 73 units of loan, which requires value of roughly 91 units. If the appraisal lands at 88, the cap yields 70.4 units and your cash shrinks by about 2.6 units. That is the appraisal shortfall in plain arithmetic.
A low appraisal leaves four options. Take less cash. Pay down the balance to restore the ratio. Wait and reappraise later. Or skip the cash-out and keep the existing loan.
Where the General Rule Breaks
Delayed financing. A cash buyer can skip the six-month wait. Under Fannie Mae’s guide, the original purchase must be arm’s-length and the source of funds documented. The new loan is capped at the documented initial investment plus financed costs, and the maximum LTV still applies to current value. Gift funds used to buy the home can’t be reimbursed from the new loan.
Free-and-clear homes. No lien doesn’t mean no cash-out. A new first mortgage on a paid-off home is still sized under the cash-out cap.
Occupancy and units. The 80% figure is for a one-unit primary home. Two- to four-unit homes and second homes drop to 75%.
Manufactured housing. Separate, stricter rules apply.
Community Seconds. These aren’t permitted alongside a cash-out refinance.
Lender overlays. The agency cap is a ceiling. An individual lender can set a lower one.
Texas homestead. The state constitution caps a cash-out on a homestead at the agency figure, and the wholesale lane for higher leverage isn’t written there.
An Option Above 80%: The No-MI Wholesale Lane
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance, plus its own six months of seasoning. This lane is narrow and subject to lender guidelines and full file review. If you fit it, the sizing math is identical. Only the cap changes.
What the Decision Looks Like in Practice
Sizing tells you what you can borrow, not whether you should. The CFPB’s home-equity guide notes that a cash-out refinance may lengthen your payoff time and raise your monthly payment, and that your interest rate and other terms reset. It also says no equity option lets you turn all of your equity into cash.
Debt consolidation deserves a hard look. The CFPB has cautioned that paying non-mortgage debts with mortgage debt can raise foreclosure risk. Its report on cash-out borrowers found paying off other debts was the most common reason borrowers gave, with home repairs second. Credit scores rose after the refinance, then eroded gradually while staying above their earlier level.
Here is the flip point. If your current loan terms are strong and the cash need is modest, keeping the loan and borrowing separately may serve you better. If you need a large lump sum and your current terms are no better than what’s available now, a cash-out refinance makes more sense. Run both paths before choosing.
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. The brokerage lays out cash-out refinance programs alongside rate-and-term options so the sizing math can be compared side by side.
Frequently Asked Questions
Can I borrow 80% of my equity?
No. The 80% applies to the home’s appraised value for the entire new loan. Your existing mortgage, any liens being paid and financed costs all come out of that amount first. What remains is your cash.
Does my own estimate of the home’s value count?
No. The appraisal governs. If it comes in below your estimate, the cap’s result falls with it, and so does your available cash. Plan with some cushion rather than the best-case value.
Can I cash out soon after buying a home?
Generally not. Conventional rules call for six months on title. The delayed financing exception is built for cash buyers, with the new loan generally capped near the documented investment. It is narrow, and it needs documentation.
Do second mortgages and HELOCs count toward the cap?
Yes. The cap applies to combined ratios, so any lien on the property uses cap room, whether the new loan pays it off or it stays in place. A first-lien HELOC paid off at closing can also qualify as an exception to the six-month title rule at Freddie Mac.
Is the 80% cap the same for every lender and every home?
No. It changes with unit count and occupancy, and manufactured homes follow separate rules. Individual lenders can also apply tighter overlays than the agency maximum. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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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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. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Freddie Mac Guide §4301.5, Cash-out refinance Mortgages
3. Freddie Mac Cash-out Refinance product page
4. Fannie Mae Eligibility Matrix
5. FHFA 2026 Conforming Loan Limit Values
6. CFPB Using Home Equity Guide
7. 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 to Refinance a Conventional Loan on Thin Equity in Year One · How a Conventional Loan Sizes Reserves for a 1-4 Unit Rental Buyer · How to Refinance a Conventional Loan on a Condo
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.