The Quick Read: Lenders sort a refinance by what the new loan does with the money, not by what you intended. If it only pays off your current mortgage and closing costs, it is rate-and-term. If real cash comes back to you, it is cash-out. Cash-out means less leverage, longer waiting periods, and a full appraisal.
- Rate-and-term reaches up to 95% LTV on a one-unit primary residence, subject to lender guidelines.
- Cash-out caps at 80% LTV on that same home, and one wholesale lane reaches 89.99% with no mortgage insurance.
- Seasoning (the waiting period) is stricter on cash-out.
- The label comes from the file, so a small cash-back amount or a paid-off second lien can change it.
What Counts as Rate-and-Term, and What Counts as Cash-Out?
A refinance replaces your first mortgage and changes the interest rate, the term, or both, without handing you meaningful 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.
Here is what the new loan may pay off in a rate-and-term deal:
- Your existing first mortgage
- The closing costs
- A purchase-money second lien (a second loan taken at the time you bought the home)
- A small, capped amount of incidental cash back
Fannie Mae’s rule is the lesser of 2% of the new loan amount or $2,000.
Anything beyond that is cash-out. That includes a second lien you took for other spending, like a HELOC (a home equity line of credit) used for a kitchen or a car. It also includes a new loan on a home you own free and clear. Both Fannie Mae’s guide and HUD’s refinance reference treat that as cash-out, with the fine print on Freddie Mac’s no cash-out page.
Here’s the catch: you can’t relabel the deal. If you pay off a HELOC that funded a remodel and want “just a rate-and-term,” most conventional files will classify it as cash-out anyway.
Lendmire’s cash-out refinance programs page covers the equity side of the choice. This article covers how the two paths differ on qualification.
How Do the Requirements Compare Side by Side?
Cash-out asks more of you on almost every line. The numbers below are the conventional (Fannie Mae and Freddie Mac) figures across the wholesale programs Lendmire places files with, subject to lender guidelines and full file review.
| Requirement | Rate-and-Term | Cash-Out |
|---|---|---|
| Max LTV, one-unit primary home | 95% (97% on limited cash-out refinances of existing Fannie Mae loans) | 80% |
| Max LTV, 2-4 units, second home, investment | Lower than primary; set by occupancy | 75% |
| Mortgage insurance | Required above 80% LTV | Required above 80% LTV, with one wholesale exception |
| Seasoning | Lighter; loans being paid off may need a short minimum | First mortgage 12+ months old; 6 months on title |
| Appraisal | Typically yes; streamlines may skip | Full appraisal |
| Cash back | Small, capped amount only | Any amount, up to the LTV cap |
For exact ceilings by occupancy and unit count, the Fannie Mae Eligibility Matrix shows how limited cash-out gets far more leverage than cash-out. Two- to four-unit and second-home properties are held to lower limits on both.
Why Does Cash-Out Get Tighter Rules?
Cash-out turns equity into new secured debt. The lender sees more risk, so it asks for more equity left in the home.
Think about the cushion. At 95% LTV on a rate-and-term, you’ve kept only 5% of the home’s value as equity. At 80% cash-out, you keep 20%. That bigger cushion is the price of taking cash. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The credit side is similar. Across wholesale conventional programs, the credit floor starts at a 620 decision score, with the automated underwriting finding governing most files and a total ratio ceiling of 50%. Manually underwritten loans run tighter, at 36% or 45% depending on reserves and score. Many lenders layer higher score requirements on cash-out. Others price it differently. That’s a lender choice, not an agency rule.
What Seasoning Rules Apply?
Seasoning is the waiting period between a purchase or earlier loan and the refinance. Cash-out has the longer clock.
On a conventional cash-out, the first mortgage being paid off 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. A wholesale no-MI cash-out lane carries its own six months of seasoning.
There are named exceptions:
- Delayed financing: If you bought with cash, you can pull money out soon after, with the original purchase documented, usually by the settlement statement. Fannie Mae allows it for buyers within six months of purchase when every requirement is met. It is still priced and capped as cash-out.
- Inheritance: A property you inherited has its own seasoning treatment.
- Legal awards: Property acquired through a legal award follows its own path.
Rate-and-term is lighter. Freddie Mac added a short seasoning requirement for the loans a no-cash-out refinance pays off, per Bulletin 2021-16. Check the current Guide, since bulletins can be superseded.
Where Does the 97% Number Actually Apply?
It applies to rate-and-term only, and only in a narrow lane. Fannie Mae’s 97% LTV FAQ says the option covers limited cash-out refinances of existing Fannie Mae loans. The property must be a one-unit principal residence with a fixed rate. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Fannie Mae’s Selling Guide on limited cash-out adds that all borrowers must occupy the home at that tier. High-balance and adjustable-rate loans are out. The 97% figure never applies to a cash-out.
A common mistake is reading “up to 97%” and assuming it covers every refinance. It doesn’t.
Which Programs Break the Usual Pattern?
Several programs sit outside the standard rate-and-term versus cash-out split.
FHA Streamline. For borrowers with an existing FHA loan, the streamline needs no appraisal and only a limited credit review, plus a net tangible benefit (a real, measurable gain from refinancing). No meaningful cash comes back. The FDIC’s FHA streamline summary confirms that streamlines reuse the prior FHA value, so there is no LTV limit to meet. It only works FHA-to-FHA. A standard FHA rate-and-term with an appraisal reaches 97.75%.
VA IRRRL. For existing VA loans, the IRRRL (the VA’s streamline refinance program) carries a 0.5% funding fee unless you’re exempt, per VA’s funding fee page. It requires no VA appraisal and a net tangible benefit. Seasoning is the later of 210 days or six payments. A non-VA loan can’t use it. A veteran who wants cash out uses the general VA refinance instead.
Jumbo. Above the conforming limit, the jumbo lanes take over. They start at a 660 decision score, reach 90% leverage, run to $5,000,000, and carry a 50% ratio ceiling on the fixed lanes. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Manufactured homes. A single-width manufactured home is limited to purchase and limited cash-out. It can’t use cash-out at all. This is the type of detail that gets missed.
Co-owner buyouts. Buying out a co-owner under a written agreement, say after a divorce or inheritance, is a limited cash-out transaction at both agencies. You don’t take cash. The loan pays the other owner their share.
Occupancy. A cash-out can be written on a primary residence, a second home, or an investment property. Occupancy sets the leverage: 80% for a one-unit primary, 75% for the others.
What About Mortgage Insurance?
Mortgage insurance is required above 80% LTV on the agency path, except in the wholesale no-MI cash-out lane. That lane reaches 89.99% LTV with a 680 score and a 50% ratio, on a thirty-year fixed, primary residence, conforming balance. Texas homestead cash-outs are different: the state constitution caps a Section 50(a)(6) loan at 80% of the home’s value, and the no-MI lane isn’t written there. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
On the standard path, Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. Your actual premium depends on score, LTV, and file details.
Cancellation is a real advantage of the conventional route. You can request it at 80% of the original value, given good payment history, no subordinate liens, and no decline in value. The servicer must end it automatically at 78% under the Homeowners Protection Act.
How Do You Choose?
Start with your goal, then check whether the requirements allow it.
| Your Goal | Usually Fits |
|---|---|
| Lower payment, same balance | Rate-and-term |
| Shorter term | Rate-and-term |
| Switch from adjustable to fixed | Rate-and-term |
| Pay off a HELOC used for spending | Cash-out |
| Consolidate other debt | Cash-out |
| Fund a major repair or project | Cash-out |
| Existing FHA or VA loan, lower payment | Streamline or IRRRL |
Picture a homeowner with 15% equity who wants to pull out money for a roof. At 80% LTV, a cash-out would leave almost nothing to borrow. At 85% LTV, cash-out simply isn’t available. A rate-and-term might be, but it can’t produce that cash. So the real answer is that this homeowner needs a different tool, or needs to wait until more equity builds. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Another example: a homeowner on title for four months wants cash out. The 6-month title clock hasn’t run. Delayed financing could apply if the purchase was all cash. If not, waiting is the plan.
If you don’t qualify for cash-out, three fallbacks are worth testing. First, trim the cash-out amount until LTV fits. Second, wait for seasoning to clear. Third, consider a separate HELOC or home equity loan, which can be compared side by side with a cash-out refinance. Keeping a lower-rate first mortgage and borrowing separately may suit some households better.
What Does Each Choice Cost You in Practice?
Cash-out generally costs more up front and over time. Closing costs on a cash-out refinance are generally higher than on some alternatives. Cash-out also replaces your whole first mortgage with a bigger balance, which can lengthen your payoff timeline.
Credit behavior matters too. Moving unsecured debt onto your home only helps if the spending habits change.
Closing costs get built into the rate or the balance in any refinance. A “no-cost” refinance doesn’t mean zero cost. It means the cost lives somewhere else.
Documents and Common Mistakes
Both paths need ID, income documents, asset statements, and your current mortgage statement. Cash-out adds the paper trail for seasoning, such as the note date of the loan being paid off and, for delayed financing, the settlement statement.
Common mistakes to avoid:
- Assuming a paid-off HELOC is automatically rate-and-term
- Applying the 97% figure to a cash-out
- Forgetting that streamlines work only for existing FHA or VA loans
- Ignoring the 12-month and 6-month clocks
- Treating a lower payment as the only measure of a good refinance
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value, shown as a percentage.
Seasoning: The waiting period a lender requires between a purchase or earlier loan and the refinance.
Limited cash-out refinance: Fannie Mae’s name for a rate-and-term refinance that returns only a small, capped amount of cash.
Delayed financing: An exception that lets a cash buyer take cash out shortly after purchase, with the original purchase documented.
Net tangible benefit: A measurable gain, such as a lower payment or a move to a fixed rate, that a streamline must show.
Incidental cash back: The small amount a rate-and-term refinance may return without being reclassified as cash-out.
Frequently Asked Questions
Can a rate-and-term refinance include any cash back?
Yes, a small, capped amount. Fannie Mae’s limit is the lesser of 2% of the new loan amount or $2,000. Beyond that, the file becomes cash-out and takes the lower LTV cap.
Does paying off a HELOC count as cash-out?
Often yes. A second lien used for the original purchase can ride along in a rate-and-term. A second lien used for other spending, such as a HELOC for a remodel, typically changes the classification to cash-out. Confirm the exact treatment with your lender before you apply.
How long do I have to own the home before a cash-out?
On a conventional cash-out, you need to have been on title for 6 months, and the first mortgage being paid off must be at least 12 months old. Delayed financing, inheritance, and legal-award exceptions exist. These figures are subject to lender guidelines.
Can I do a cash-out refinance on a second home or rental?
Yes, with lower leverage. A cash-out is written on a primary residence, second home, or investment property, and occupancy sets the limit. It is 80% on a one-unit primary home and 75% on the others.
Do FHA and VA streamlines need an appraisal?
No. The FHA Streamline reuses the prior FHA value, and the VA IRRRL requires no VA appraisal. Both need an existing loan in the same program and a net tangible benefit. Neither returns meaningful cash.
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, subject to lender guidelines and full file review. Nothing here is a commitment to lend.
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. Freddie Mac’s no cash-out page
2. Fannie Mae Eligibility Matrix
4. Fannie Mae FAQs: 97% LTV Options
5. Fannie Mae Selling Guide B2-1.3-02: Limited Cash-Out Refinance Transactions
6. FDIC: FHA Streamline Refinance Summary
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-Out Refinance Requirements for a Second Cash-Out Refinance in a Row · Cash-Out Refinance Requirements After a Job Change · Can You Get Approved for a Cash-Out Refinance Instead of a Rate-and-Term Refinance?
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
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.