The Quick Read: The best program for your situation is almost always a standard cash-out refinance, because paying off a home equity investment (HEI) is not the same as paying off your first mortgage. Streamline products and rate-and-term refinances are built to retire the first loan and little else. The right fit depends on what kind of loan you hold now, how much equity you have, and how large the HEI payoff is. Lendmire is a mortgage broker, so it shops this across multiple wholesale lenders and matches your file to the program.
Key Takeaways
- An HEI gives you cash today in exchange for a share of your home’s future value. Ending it early means paying a dated lump sum.
- Funds that retire an HEI generally run as cash-out, so cash-out leverage limits and cash-out seasoning rules apply.
- Existing FHA and VA loans have streamline options, but those cannot retire an HEI.
- The deal works only if your first mortgage plus the HEI payoff fit under the cash-out cap.
- A refinance replaces a payment-free HEI with a regular mortgage payment on a bigger balance.
Key Terms Defined
Home equity investment (HEI): A contract where a company gives you a lump sum now and takes a share of your home’s value later. Many have no monthly payment.
Payoff statement: A dated figure from the HEI company showing what it takes to end the contract, with a good-through date.
Cash-out refinance: A new mortgage larger than what you owe, with the extra paid out or used for another purpose, such as retiring a HEI.
Rate-and-term (limited cash-out) refinance: A new mortgage that pays off the first loan and closing costs, with only small incidental cash back.
LTV (loan-to-value): Your loan balance divided by your home’s appraised value.
Seasoning: The minimum time a loan or ownership must exist before a new loan can be written.
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.
Why Does an HEI Payoff Run as Cash-Out?
An HEI payoff runs as cash-out because the HEI is not a loan that financed your purchase. A refinance can only retire the first mortgage, closing costs, and a purchase-money second lien. An HEI sits outside that list.
One caution up front: the agencies’ rules do not name a “home equity investment” payoff directly. This classification comes from how the agencies treat liens that did not finance the purchase. Your loan officer will confirm it with the wholesale lender before the file goes forward.
Under Fannie Mae’s limited cash-out rules, a deal stays in the rate-and-term lane only if it meets a defined list of conditions. Break one, and it must be treated as cash-out. Paying off a non-purchase-money lien is the kind of thing that breaks it.
The agency limited cash-out allowance is small by design. Fannie Mae allows the lesser of 2% of the new loan or $2,000. Freddie Mac allows the greater of 1% of the new loan or $2,000. Neither is close to an HEI payoff.
The Consumer Financial Protection Bureau has described these contracts as more expensive than other home-secured financing. That is part of why people want out early. It also means the payoff can be large.
Which Program Fits Your Situation?
The program that fits depends on the loan you hold now, your equity, and how you use the home. Across the wholesale programs Lendmire places files with, conventional cash-out is the usual landing spot, with government cash-out lanes for borrowers already in FHA or VA loans.
| Your situation | Likely program | What limits the cash | Watch-out |
|---|---|---|---|
| Conventional first mortgage | Conventional cash-out | 80% LTV, one-unit primary | First loan must be 12+ months old |
| Existing FHA loan | FHA cash-out, or conventional | FHA cash-out leverage cap | Streamline cannot retire an HEI |
| Existing VA loan | VA cash-out | VA cash-out leverage cap | IRRRL allows no cash out |
| Balance above conforming limit | Jumbo lane | Jumbo leverage, to 90% | Higher score, 660 decision score |
| Strong credit, primary home, conforming balance | Wholesale no-MI lane | Up to 89.99% LTV | 680 score, 50% ratio, 6-month seasoning |
Lendmire’s cash-out refinance programs page lays out these lanes in more detail.
Conventional cash-out
This is the workhorse. The conventional limit is 80% LTV on a one-unit primary residence. Two- to four-unit primary homes, second homes, and investment property top out at 75%, so occupancy sets the leverage. Credit starts at a 620 decision score on the wholesale conventional programs, and the automated finding governs most files, with a total ratio ceiling of 50%.
Mortgage insurance is required above 80% LTV on the agency path, with the exception of the wholesale no-MI cash-out lane below. Cash-out loans cap at 80%, so most conventional cash-outs do not carry it. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
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, a conforming balance, and its own six months of seasoning. That extra room can matter when an HEI payoff is large. It is not written in Texas on a homestead, where the state constitution caps a cash-out at 80% of the home’s value. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
FHA and VA borrowers
If your first mortgage is FHA, the HUD Streamline refinances an existing FHA-insured loan with limited credit review. HUD caps cash back at $500 and does not allow closing costs to be rolled into the loan. That leaves no room for an HEI payoff. A VA IRRRL is VA-to-VA only and has no cash out. Both are great tools for lowering a payment. Neither retires a HEI.
Your options are an FHA or VA cash-out, or a conventional cash-out that moves you out of the government program. That last choice changes your mortgage insurance picture, so weigh it carefully.
Does the Payoff Fit Under the Cap?
It fits only if your first mortgage balance, the HEI payoff, and financed costs together stay at or below the cash-out cap on the appraised value. This is the test that decides most files.
Run it as percentages. Say your first mortgage is 40% of the home’s appraised value. The HEI payoff is 25% of that value. Costs add about 2%. The new loan is roughly 67% of value, well under the 80% conventional cap. That file has room, and likely leftover cash.
Now change one input. Say the first mortgage is 55% of value and the HEI payoff is 28%. With costs, the total lands near 85%. That is over the 80% conventional cap. This borrower has three paths: bring cash to closing, negotiate a partial buyout if the contract allows one, or look at the no-MI wholesale lane, which reaches 89.99% for borrowers who meet its credit and seasoning requirements.
Both examples are modeled assumptions, not typical results.
Why the appraisal cuts both ways
The appraisal sets the lender’s value. The HEI company often runs its own valuation, and your payoff formula may be tied to home value at settlement. The CFPB notes that settlement amounts depend on home value, sometimes with a discounted starting value or a multiplier.
So a higher appraisal raises your loan ceiling. It can also raise your payoff. A low appraisal shrinks the room for the payoff. Neither number is fully in your control, which is why you ask for the payoff statement early.
The Seasoning Clocks
Cash-out has waiting periods. The first mortgage being paid off must be at least 12 months old, measured from its note date to the new note date. Fannie Mae put this rule in a 2023 announcement. You also generally need to have been on title for 6 months, with exceptions for delayed financing, inheritance, and legal awards.
A recent purchase or a recent first-mortgage refinance can therefore block the deal. If you refinanced last spring and signed an HEI around the same time, check the dates before you plan anything. Your loan officer can read the note dates against the lender’s rule.
A property listed for sale is also ineligible for a cash-out refinance at Fannie Mae. Confirm the current guide wording with your lender.
Why Timing Matters When You End It Early
Timing matters because the payoff is a moving number. Many HEI contracts tie it to home value at settlement, so the same contract produces a different payoff at different values. Some providers cap the settlement amount and others do not. Some offer partial buyouts. These are contract terms, not program rules.
The CFPB’s illustrative example shows how wide the gap can get. On a $50,000 advance, repayment ranged from $94,074 to $215,892 across appreciation scenarios, as reported by ALTA. That is the CFPB’s example, not a typical result.
Here is how to stress-test your own file. Ask for the payoff at today’s value. Ask what it would be if the home were worth more. Then see how each version fits under the cap. If the payoff grows faster than your equity cushion, waiting makes the refinance harder.
Check your contract for three things before you apply: any minimum hold period or early-exit terms, how the settlement value is determined, and any notice or consent requirement that applies if you refinance your first mortgage.
Cash-Out vs. Other Ways to End an HEI
A cash-out refinance is the standard non-sale exit, but it is not always the more affordable choice. It replaces your existing first mortgage, so it resets your rate, your payment, and your payoff timeline. If your current first mortgage is a low-cost one, giving it up has a real price.
| Option | Best for | Main drawback |
|---|---|---|
| Cash-out refinance | Plenty of equity, first loan not especially low-cost | Resets first mortgage terms |
| HELOC or home equity loan | Keeping a low first mortgage | Second payment, separate approval |
| Savings | Payoff small relative to cash | Drains reserves |
| Partial buyout | Contract allows one | Provider-specific |
| Sale of the home | Equity is large and you are ready to move | You lose the home |
To compare the first two, weigh the blended cost. A cash-out puts the whole balance under one new loan. A second lien leaves your first loan alone and adds a separate one for the HEI payoff. Add up what each setup costs on the full balance, including closing costs, and compare. Your loan officer can run that comparison from a Loan Estimate.
Also, an HEI has no monthly payment, and a refinance adds one. The lump-sum settlement is the real cost, but your monthly budget changes too.
Step by Step: From Payoff Request to Lien Release
Here is the sequence a file generally follows.
1. Request the payoff statement. It carries a good-through date. Providers generally recommend one comfortably beyond your expected closing.
2. Check your contract clauses. Look at exit terms, valuation method, and refinance notice requirements.
3. Run the cap test. Add the first-mortgage payoff, the HEI payoff, and costs. Compare to the cash-out cap.
4. Choose a program. Your broker matches the file to a wholesale lender and program.
5. Appraisal and underwriting. The appraisal sets value. Underwriting reviews income, credit, assets, and debt-to-income, as on any cash-out loan. Reserves may apply when ratios run high.
6. Title work. Title finds the HEI’s recorded interest. The payoff is wired at closing and the release is recorded.
7. Disbursement. The HEI company is paid, the first mortgage is paid, and any leftover cash goes to you.
If your payoff statement expires before closing, you will need a refreshed one. A valuation change in between can move the number.
Who Should Not Do This
A cash-out refinance can be the wrong move in three situations.
- Thin equity. If the payoff plus your first mortgage lands above every cap, the refinance cannot be written without cash from you.
- A first mortgage you do not want to lose. If your current loan is much cheaper than a new one, a second lien or savings may cost less.
- Strained income or credit. HEI companies may not check ability to repay the way a mortgage lender will. Underwriting now will look at income, credit, assets, and ratios. The agencies’ waiting periods after credit events apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
Skip the refinance in those cases, or fix the gap first. The honest answer sometimes is “not yet.”
Shared-equity programs are a different thing, by the way. Co-ownership structures at purchase are not the same as a private HEI. For a related scenario, see Lendmire’s piece Best Cash-Out Refinance Program With a Home Equity Investment Already on the Property.
Common Misconceptions
“An HEI isn’t debt, so it doesn’t matter to a refinance.” The CFPB’s consumer advisory says there will likely be a lien on the home. Title will find it. Note that the CFPB’s legal position on these contracts is contested and could change.
“A streamline will pay it off.” Not necessarily: HUD limits the cash a borrower can receive at closing on a streamline to $500, so a streamline is not a way to pull out equity and clear a HEI.
“Streamline means no costs.” HUD says the term describes how much documentation and underwriting the lender does, not what the loan costs.
“No monthly payment means it’s cheap.” The CFPB says these contracts are expensive compared with other home-secured financing.
“Cash-out always wins.” It depends on closing costs, your equity cushion, and what you give up on the first mortgage.
Frequently Asked Questions
Can a rate-and-term refinance pay off my HEI?
Generally no. That lane covers the first mortgage, closing costs, and a purchase-money second, with only small incidental cash back. An HEI did not finance your purchase, so the payoff is treated as cash-out. Your loan officer confirms the classification with the lender.
Does the HEI payoff count against my loan-to-value limit?
Yes. The new loan has to cover your first mortgage, the HEI payoff, and any financed costs. That total must stay at or under the cash-out cap, which is 80% on a one-unit primary residence for conventional loans. Your appraised value drives the math.
Can I use an FHA Streamline or VA IRRRL to end an HEI?
No. An FHA Streamline limits cash back to $500, and a VA IRRRL has no cash out. An FHA or VA cash-out refinance, or a conventional cash-out, is the route, subject to lender guidelines and full file review.
Will a recent refinance block a cash-out to pay off an HEI?
It can, since a recent refinance may trigger seasoning rules. The first mortgage being paid off must be at least 12 months old, and you generally need 6 months on title. Check your note dates before you start.
What if the HEI payoff is bigger than my equity allows?
You have three options: bring cash to closing, ask whether your contract permits a partial buyout, or look at a lane with higher leverage if you qualify. Otherwise, a different exit may fit better.
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. For a move-related angle, Lendmire’s piece on tapping home equity while relocating covers the timing questions.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
2. CFPB Issue Spotlight: Home Equity Contracts
3. HUD Single Family Streamline Refinance
5. alta.org: CFPB Report Examines Risks of Home Equity Contracts
6. CFPB Consumer Advisory (PDF copy)
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Cash-Out Refinance Program Without Paying Upfront for the Home Appraisal · Best Cash-Out Refinance Program to Pull Cash Out of Your Home Equity
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.