The Quick Read: The right program depends on four things: the loan you have now, the equity left after the new loan, what your home is worth today, and whether the project needs a loan sized to its finished value. A standard conventional cash-out refinance reaches 80% of your home’s value on a one-unit primary residence. A renovation mortgage can lend against the finished value instead. Streamline refinances cannot fund a kitchen at all. Every figure here is subject to lender guidelines and full file review.
Key Takeaways
- A standard cash-out refinance pays off your current mortgage and hands you the difference in cash. You can spend that cash on anything, including a kitchen.
- On a conventional loan, the new balance is capped at 80% of the home’s current value on a one-unit primary residence. A kitchen you have not built yet does not count toward that value.
- Renovation mortgages work differently. They lend against the “as completed” value, but the money is released in stages as work is verified.
- FHA Streamline and VA streamline refinances are for lowering the cost of an existing loan. They do not give you cash.
- The new loan replaces the old one, so the whole balance is repriced. Check the cost on the full balance, not just the cash you receive.
Which Cash-Out Refinance Program Fits a Kitchen Renovation?
Most kitchen projects fit one of three lanes: a standard cash-out refinance, a government-backed cash-out, or a renovation mortgage. Which one works depends on your current loan type, your equity, and how you plan to pay the contractor.
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: 7.24% as of October 29, 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.
“Program” is the word that confuses people. It does not mean a lender’s brand. It means the set of rules a loan follows: how much of the home’s value it can reach, what credit score it needs, how long you must have owned, and how the cash is released.
Lendmire is a mortgage broker. It arranges these loans through a network of wholesale cash-out refinance lenders and matches the file to a program. Lendmire’s cash-out refinance programs page lays out the lanes in more detail. The lenders that write each lane depend on your property, credit, equity and documents, so the best program for your situation may not be the best for your neighbor’s.
Here is how the main choices compare for a kitchen:
| Program | Can fund a kitchen? | Key limit |
|---|---|---|
| Conventional cash-out | Yes, any use | 80% LTV, one-unit primary |
| Wholesale no-MI cash-out lane | Yes, any use | Up to 89.99% LTV, 680 score |
| Renovation mortgage | Yes, paid in stages | Based on “as completed” value |
| VA cash-out | Yes, eligible veterans | Needs Certificate of Eligibility |
| FHA cash-out | Yes, any use | 80% LTV cap |
| FHA Streamline / VA streamline refinance | No | No cash out |
LTV means loan-to-value: the new loan balance divided by the home’s appraised value. Details on each lane follow below.
How a Kitchen Cash-Out Is Sized, Step by Step
The loan size is set by one number: your home’s appraised value today. The lender multiplies that value by the program’s LTV cap, subtracts what you owe and the closing costs, and the remainder is your cash.
Run it in percentages. Say your home appraises at 100% of its value and you owe 50% of that. A conventional cash-out on a one-unit primary residence caps the new loan at 80%. That leaves room for roughly 30% of the home’s value, before closing costs come out of the proceeds. Your net cash is smaller than that, and you size the request to cover the contractor’s bid plus a cushion.
Now picture a different homeowner who owes 70% of the value. The same 80% cap leaves only about 10% of value in room, before costs. A large kitchen may not fit. That homeowner has a decision to make about scope, or about a renovation loan that counts the finished value.
Here is the flow of a typical file, from application to funds:
1. Set the project and the budget. Get contractor bids and add a buffer. A standard cash-out does not ask for the budget, but you need it to choose the loan amount.
2. Identify your current loan. Conventional, FHA and VA loans each open different doors.
3. Check ownership and seasoning. Seasoning is the minimum age of the loan being paid off. On conventional cash-out, the first mortgage must be at least 12 months old, counted from note date to note date. You also need to have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
4. Underwriting. The lender reviews credit, income, assets and debt-to-income ratio (your monthly debts divided by your monthly income). Expect pay records, tax returns or W-2s, and asset statements. Document lists vary by lender and program.
5. Appraisal. The appraiser values the home as it stands. Your plans for the kitchen do not add value on a standard cash-out.
6. Closing. The new loan pays off the old first mortgage. You receive the difference, after costs, at closing.
That last point matters for contractors. Funds arrive at closing, not before. A deposit due earlier needs another source.
What Lenders Look For
Wholesale conventional programs generally start at a 620 decision score, and the automated underwriting finding governs most files. The total debt ratio ceiling is 50% on the automated lanes. Manually underwritten loans use tighter ratios of 36% or 45%, with reserve and score factors from the agency’s Eligibility Matrix.
Across the wholesale programs Lendmire works with, a cash-out file gets stronger on three points: a clean payment history on the loan being paid off, a debt ratio with room to spare, and equity that stays well above the cap after closing. Credit events carry agency waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
One lane deserves a mention. A wholesale lane reaches 89.99% LTV with no mortgage insurance on a 30-year fixed, primary residence, conforming balance. It needs a 680 score and a 50% ratio, plus its own six months of seasoning. That lane is not written on a Texas homestead, where the state constitution caps cash-out at the agency figure. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Mortgage insurance is a monthly cost that protects the lender when you borrow above 80% LTV. Published typical annual premiums run from 0.58% to 1.86% of the balance. That is a range, not a quote. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The Renovation Mortgage Lane
A renovation mortgage is built for this exact job. It lends against what the home will be worth after the work, not what it is worth now.
Fannie Mae’s HomeStyle Renovation is the best-known example. It can be done as a purchase or as a limited cash-out refinance, and Fannie Mae’s guide requires an appraisal of the property “as completed.” Plans and specs come from a licensed contractor, consultant or architect.
The trade-off is control. The renovation money does not land in your account. It sits in a custodial account, and the contractor draws against progress while the lender confirms the work. Fannie Mae’s HomeStyle FAQ says the work must be completed within a set window after closing, and the exact timing varies by file and lender.
It also is not for every project. HomeStyle cannot fund a complete tear-down and rebuild. Freddie Mac has its own renovation mortgages, and its 12-month seasoning rule is waived for them. Availability varies by lender, so a broker that shops several wholesale lenders can tell you which ones offer this lane for your property.
This is a genuine toss-up for many homeowners. A renovation loan reaches more value and pays the contractor in a controlled way. A standard cash-out is simpler and gives you the cash with no strings on spending, but it only counts what the house is worth today. Smaller kitchens with ample equity lean toward the standard loan. Big projects on thin equity lean toward the renovation lane.
Government Loans: FHA, VA and the Streamlines
If your current loan is government-backed, your options change.
FHA cash-out. HUD Mortgagee Letter 2019-11 cut the maximum LTV on FHA cash-out refinances from 85% to 80% of adjusted value. FHA had previously lowered it in 2009, from 95% to 85%. The result is that an FHA cash-out leaves you at least 20% equity.
VA cash-out. VA’s cash-out page says a VA cash-out can pull equity for home improvements, and it can also refinance a non-VA loan into a VA loan. You need a Certificate of Eligibility and must meet VA and lender credit and income standards. A funding fee may apply at closing. VA also applies a net tangible benefit test, meaning the refinance has to leave you better off in a defined way.
The streamlines. FHA Streamline and VA IRRRL are rate-and-term programs for existing loans of the same type. The FHA version runs with no appraisal and limited credit review, and it requires a net tangible benefit. The VA version carries a 0.5% funding fee unless you are exempt, needs no VA appraisal, and requires seasoning of the later of 210 days and 6 payments. Neither gives you general cash. If you hear that a streamline can fund your kitchen, that is a misunderstanding.
Where the General Rule Breaks
The 80% rule is a starting point. These cases bend it:
- Limited cash-out is not cash-out. A rate-and-term refinance (the agencies call it limited cash-out) reaches 95% LTV on a one-unit primary residence. It pays off your first mortgage, closing costs and any purchase-money second lien, with only incidental cash back. It is a payoff tool, not a kitchen fund.
- A second lien can change the label. Adding a new second loan or home equity line while refinancing the first can change how the first mortgage is classified. Tell your loan officer about every lien you plan to open.
- Free-and-clear homes still count as cash-out. Owning with no mortgage does not make the refinance a different type. Freddie Mac’s guide treats it as cash-out, and the same section requires every borrower on a primary-residence cash-out to occupy the home.
- Manufactured homes face tighter limits. Eligibility is lower or absent, and renovation cash-outs cannot be secured by them.
- Occupancy sets leverage. A second home or a rental property drops to 75% LTV, while a one-unit primary residence stays at 80%.
- Texas homesteads are capped by the state constitution, so the no-mortgage-insurance wholesale lane is not available there. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Cash-Out Refinance or a Second Loan? The Break-Even Test
A cash-out refinance reprices your whole mortgage. A home equity loan or line of credit leaves your first mortgage alone and adds a second loan on top. That is the real comparison.
If your current first mortgage has favorable terms you want to keep, a cash-out forces you to give them up on the entire balance for the sake of the new money. In that case a second loan can cost less in total. If your current terms are not worth protecting, cash-out may win, because you get one loan and one payment.
Here is a simple test:
1. Take the extra cost of the new first mortgage on the whole balance.
2. Add the closing costs.
3. Divide by the cash you actually receive.
4. Compare that to the cost of a second loan for the same amount.
Your Loan Estimate shows the costs. Compare it against a quote for the alternative before you decide. Cash-out pricing also adds a credit fee on conventional loans, and government loans add mortgage insurance or a VA funding fee.
Using home equity carries real risk. The larger loan may raise your payment and lengthen your payoff, and your home is the collateral. Be cautious of contractors who push homeowners toward particular loans. Get your own financing in place on your terms before you sign a contract.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Common Mistakes
- Expecting the appraiser to count the new kitchen. On a standard cash-out, the finished kitchen is not in the value.
- Sizing the loan to the bid and nothing else. Overruns happen. A lump sum fixed at closing has no room for them unless you built in a cushion.
- Skipping the seasoning check. A recent purchase or refinance can block you, so confirm the dates before you apply.
- Using streamline marketing as a cash source. Streamlines lower the cost of the existing loan. They do not fund projects.
- Ignoring how much equity is left. After the new loan, you hold a thinner cushion. If prices dip, that cushion is what protects you.
- Judging the loan by the cash alone. The whole balance is new, so price the whole balance.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your current loan and gives you the difference in cash.
LTV (loan-to-value): The loan balance divided by the home’s appraised value, shown as a percentage.
Seasoning: The minimum age of the loan you are paying off, or the time you have been on title, before a program allows the refinance.
Limited cash-out refinance: A refinance that pays off your mortgage and closing costs, with only a small amount of cash back.
Net tangible benefit: A test that government streamlines and VA cash-outs use to confirm the refinance leaves you better off in a defined way.
“As completed” value: What an appraiser estimates the home will be worth once the planned work is finished. Renovation mortgages use it.
Mortgage insurance: A cost that protects the lender when you borrow above 80% LTV. On conventional loans, you can ask to cancel it at 80% of the original value, and the servicer must end it at 78%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Weighing Your Options
If your project is modest and you have plenty of equity, a standard cash-out is usually the simplest route. If the project is large and equity is thin, a renovation mortgage deserves a look. If you hold an FHA or VA loan, a streamline will not help, but a government cash-out might. 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.
Frequently Asked Questions
Can I use a cash-out refinance for a kitchen remodel?
Yes. On a standard cash-out, there is no restriction on how you spend the proceeds, and a kitchen is a common use. The limit is how much equity the program lets you borrow against, which on a conventional one-unit primary residence is 80% of the home’s current value.
Will the appraisal count my new kitchen?
Not on a standard cash-out. The appraiser values the home as it stands today, so the planned kitchen adds nothing. A renovation mortgage is the exception, because it uses the “as completed” value and then releases funds in stages as work is verified.
Can an FHA Streamline or VA IRRRL pay for my kitchen?
No. Both are rate-and-term programs for existing loans of the same type. They are meant to lower your costs, not to give you cash. If you hold an FHA or VA loan and need project funds, look at an FHA or VA cash-out instead.
How much equity do I need left after a kitchen cash-out?
It depends on the program. Conventional cash-out on a one-unit primary residence leaves at least 20% equity, and so does FHA cash-out. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score, leaving about 10%. Every figure is subject to lender guidelines and full file review.
How does a broker help me choose a program?
A broker shops several wholesale lenders and matches your scenario to the program that fits it. Lendmire does not lend. The lenders and programs that fit depend on your property type, credit, equity and documents. A broker is paid by the lender or by the borrower, and the compensation is disclosed on your Loan Estimate. Compare the full terms of every offer.
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 brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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: HomeStyle Renovation collateral considerations
2. Fannie Mae FAQs: HomeStyle Renovation
3. HUD Mortgagee Letter 2019-11
4. VA cash-out refinance loan page
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Fourplex Cash-Out Refinance Need More Reserves Than a Duplex? · How to Use Cash-Out Refinance Proceeds on a Primary Home Wisely · How to Get a Cash-Out Refinance After Buying a Home With Cash
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.