The Quick Read: The best program depends on the loan you hold now, the size of the project, and how much equity you keep after closing. A standard conventional cash-out refinance fits most remodels because the cash is unrestricted. FHA and VA cash-out refinances serve borrowers whose current loan or service history points that way. A renovation loan fits when the work is large and the value comes from the finished home. Every figure here is subject to lender guidelines and full file review.
What does a cash-out refinance actually do for a remodel?
A cash-out refinance replaces your current first mortgage with a new, larger one. The new loan pays off the old balance, and you receive the difference as cash. Contractors get paid from that cash.
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.
The CFPB’s research on cash-out refinances describes it as one way homeowners tap home equity. It also warns that reaching that equity can carry substantial costs, such as origination, appraisal and title fees.
Two points matter for a remodel:
- The whole mortgage is reset, not just the new cash. Your balance, term and rate on the entire loan change.
- The cash is generally unrestricted. The lender does not track how you spend it, and there is no draw schedule or inspection.
That freedom is useful. It is also a risk, because overruns come out of your pocket.
What does “program” mean here?
Home improvement is not its own loan program. When people search for the best program, they are choosing among a few categories. Across the wholesale programs Lendmire’s brokerage works with, the choices look like this:
| Program | Fits when | How funds arrive |
|---|---|---|
| Conventional cash-out | You have equity and a conventional or FHA loan now | Lump sum at closing |
| FHA cash-out | Your credit or ratios suit FHA guidelines | Lump sum at closing |
| VA cash-out | You are an eligible veteran or service member | Lump sum at closing |
| Renovation loan (such as HomeStyle) | The project is large and adds value | Drawn against the work |
Lendmire’s cash-out refinance programs page covers the loan types the brokerage arranges. Lendmire is a mortgage broker, not a lender, so it shops multiple wholesale lenders and matches your scenario to the program. The lenders that write each program, and the best fit for you, depend on your property, credit profile, leverage need and documentation.
How much can you borrow on a conventional cash-out?
Conventional cash-out on a one-unit principal residence typically tops out at 80% LTV. Two- to four-unit homes, second homes and investment properties run lower, at 75%. Eligibility details sit in the Fannie Mae Selling Guide’s cash-out section.
Seasoning also applies. The first mortgage being paid off generally must be at least 12 months old, measured note date to note date, and a borrower must have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed, primary residence with a conforming balance. It carries its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution, and that wholesale lane is not written there. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Since the cash is the point, size it backward. Take the contractor bid, add a contingency for surprises, then add the closing costs you plan to roll in. That total is your target cash-out. Rolling costs into the loan raises the balance and uses up LTV room, so paying them in cash can preserve borrowing power.
FHA, VA and the streamlines: which can fund a remodel?
Only the cash-out versions can. The streamlines cannot.
The FHA Streamline and the VA IRRRL exist to lower the cost of an existing government loan. Neither puts cash in your hand, so neither can pay a contractor. The VA IRRRL carries a 0.5% funding fee unless you are exempt, and needs seasoning of the later of 210 days and 6 payments.
The VA’s cash-out loan page explains that eligible borrowers can use a VA-backed cash-out refinance for purposes including home improvements. If you hold a VA loan and want cash for a remodel, that is the government lane to compare. An FHA cash-out is the parallel option for borrowers whose profile suits FHA guidelines.
When does a renovation loan beat a plain cash-out?
A renovation loan wins when the project is big enough that today’s appraised value will not support the cash you need. Products like Fannie Mae’s HomeStyle can lend against the home’s value after the work is complete. Fannie Mae’s HomeStyle Renovation materials describe financing based on as-completed appraised value, with a cap on the renovation cost.
The tradeoff is process. Renovation loans generally require contractor bids and a draw schedule. A plain cash-out gives you the money at closing with no oversight.
This is a genuine toss-up for mid-sized projects. A plain cash-out is simpler and gives you control. A renovation loan can reach more money. Gut renovations and fixer-uppers lean toward the renovation loan. Kitchen refreshes, roofs and phased work lean toward plain cash-out.
An appraisal on a plain cash-out values the home as it stands. An unfinished project does not count as finished value.
Cash-out versus limited cash-out
Limited cash-out, often called rate-and-term, pays off your existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. It reaches higher leverage: 95% LTV on a one-unit principal residence, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. Mortgage insurance applies above 80%.
You cannot use limited cash-out to fund a remodel, since the cash back is too small. If you need meaningful money for contractors, you are in cash-out territory with its lower leverage cap.
How do you compare cash-out with a HELOC or home equity loan?
A cash-out replaces your first mortgage. A home equity loan or HELOC sits on top of it and leaves the first mortgage untouched. That difference drives the decision.
| Factor | Cash-out refinance | HELOC / home equity loan |
|---|---|---|
| Your first mortgage | Replaced | Left in place |
| Terms reset | Whole balance | Only the new loan |
| Funds | Lump sum | Line or lump sum |
| Best when | Your current loan is worth replacing | Your current loan is worth keeping |
Run this test in three steps:
1. Price the new loan on your entire balance.
2. Price your existing first mortgage plus a second loan.
3. Compare the blended monthly cost and the total interest over the time you will hold the home.
The common rule of thumb: if your existing mortgage is already at or above current market pricing, replacing it costs you little and cash-out looks strong. If your existing mortgage sits well below market, a second loan usually preserves that advantage. Your lender’s quotes settle it. That is why the existing-loan comparison matters.
What does the lender look at?
Underwriting for cash-out looks at credit, income, debt-to-income and reserves. It is usually stricter than for a refinance.
- Credit: Wholesale conventional programs start at a 620 decision score. Most files follow the automated finding, with a total ratio ceiling of 50%.
- Manual underwriting: These loans run 36% or 45% ratios, tied to the Eligibility Matrix’s reserve and score factors.
- Credit events: Agency waiting periods apply. Four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
- Jumbo: Above the conforming limit, the jumbo lanes take over with a 660 decision score, leverage to 90%, loans to $5,000,000, and a 50% ratio ceiling on fixed lanes.
Mortgage insurance applies above 80% LTV. You can request cancellation at 80% of original value with good payment history, and the servicer must terminate it at 78% under the Homeowners Protection Act. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Step by step: from bid to paid contractor
1. Get a written scope and bids from your contractors.
2. Add a contingency cushion for overruns.
3. Compare program types against your current loan.
4. Apply, receive your Loan Estimate and review it.
5. Complete the appraisal, which values the home as it stands.
6. Close, receive the proceeds, and pay contractors on your schedule.
Lining up contractor scheduling with your loan timing matters, especially for seasonal work like roofing or exterior projects.
Who should skip this?
Skip a cash-out refinance if any of these apply:
- Your current mortgage is far below market pricing and the project is small.
- The cash-out would leave you with thin equity after closing.
- You are not sure the project is needed or fully scoped.
- You would struggle with the larger balance if your income dipped.
This debt is secured by your home. Falling behind puts the property at risk.
Key Terms Defined
Cash-out refinance: A new, larger first mortgage that pays off the old one and gives you the difference in cash.
LTV (loan-to-value): The loan balance divided by the home’s appraised value.
Seasoning: The required time you have owned the home or held the existing loan before cash-out is allowed.
Limited cash-out: A refinance that pays off the old loan and costs, with only incidental cash back.
Renovation loan: A mortgage whose funds are tied to a repair scope and released as work is completed.
Frequently Asked Questions
Can I use cash-out money for any home improvement?
Yes. Conventional, FHA and VA cash-out proceeds are generally unrestricted, so a kitchen, roof or addition all qualify. The lender does not inspect the work. A renovation loan is the exception, since its funds are drawn against the project.
Can an FHA Streamline or VA IRRRL pay for a remodel?
No. Both are rate-and-term products on an existing government loan and do not give you cash. For remodel money, look at an FHA or VA cash-out refinance instead, subject to lender guidelines.
Is cash-out cheaper than a HELOC?
Not always. A cash-out resets your whole balance and carries closing costs, which the CFPB describes as potentially substantial. A second loan leaves your first mortgage alone. Compare both on your actual numbers.
Does the appraisal count the finished project?
On a plain cash-out, no. The home is valued as it stands before the work. Renovation loans can lend against the as-completed value, which is why they reach further on large projects.
How much equity do I need left over?
Conventional cash-out on a one-unit principal residence is generally capped at 80% LTV, so you keep at least 20% equity. The wholesale lane that reaches 89.99% LTV has stricter score and ratio requirements.
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. Reach the team at 828-256-2183.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. 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. CFPB’s research on cash-out refinances
2. Fannie Mae Selling Guide B2-1.3-03: Cash Out Refinance Transactions
4. Fannie Mae HomeStyle Renovation (document 44506)
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: High-LTV Cash-Out Refinance vs Home Equity Loan on a Primary Home · How to Roll a Solar Panel Loan Into a Cash-Out Refinance · Should Co-Owners Use a Cash-Out Refinance Buyout or Sell the Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.