The Quick Read: A cash-out refinance replaces your current mortgage with a new, larger one and pays you the difference in cash. On a one-unit primary home, the new loan generally tops out at 80% of the appraised value, and the home has to clear two ownership clocks first. The first mortgage being paid off must be at least 12 months old, and a borrower must have been on title for 6 months, subject to lender guidelines and full file review.
What Is a Conventional Cash-Out Refinance?
A conventional cash-out refinance is a new first mortgage that pays off the old one, with the extra paid to you. “Conventional” means the loan follows Fannie Mae or Freddie Mac rules instead of FHA or VA rules. The whole balance is replaced, not just the cash portion.
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.
That last point trips up first-timers. You don’t keep your current loan and add to it. The old loan is retired, and the new loan carries a new balance, a new term and a new payoff clock. Whatever you owed, plus the cash you took, plus any closing costs rolled in, is the new balance.
It helps to know where this sits among the other products. Lendmire’s cash-out refinance programs page covers the program side.
| Product | What happens to your first mortgage | Cash to you |
|---|---|---|
| Cash-out refinance | Replaced by a bigger loan | Yes, the difference |
| Rate-and-term (limited cash-out) | Replaced | Only small incidental cash |
| Home equity loan | Stays in place | Lump sum, second payment |
| HELOC | Stays in place | Credit line, second payment |
The Fannie Mae Selling Guide treats cash-out as its own transaction type. Cash-out pricing applies, and a loan-level price adjustment can attach based on leverage and credit score. That’s why cash-out typically prices higher than a plain rate-and-term refinance.
How Is the Loan Underwritten, Step by Step?
Underwriting runs in a set order. Knowing the order lets a first-timer see where a file can stall.
1. Check the two clocks. The existing first mortgage must be at least 12 months old, measured note date to note date, and at least one borrower must have been on title for 6 months. Fannie Mae set the 12-month rule in an announcement on cash-out seasoning. Miss either one and the file waits.
2. Apply and receive disclosures. The lender issues a Loan Estimate, then later a Closing Disclosure. Both itemize loan costs, and costs can be financed. Costs paid out of the loan reduce the cash you receive.
3. Automated underwriting. The lender runs the file through Fannie Mae’s Desktop Underwriter or Freddie Mac’s equivalent. The system weighs credit, debt-to-income, reserves and leverage together. The loan has to be run as a cash-out. Labeling it a limited cash-out to dodge the stricter caps is not permitted.
4. Valuation. Value drives everything, because the cap is a percentage of appraised value. Most cash-out loans above 70% leverage need a full appraisal. Hybrid appraisals are allowed on cash-out. Skipping an appraisal (“value acceptance”) is limited on cash-out and needs a prior appraisal in Fannie Mae’s data. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
5. Payoff and proceeds math. Take the appraised value times the cap. Subtract every lien being retired. Subtract financed closing costs. What’s left is your cash.
6. Closing. You sign the Closing Disclosure and the note.
7. Rescission window. On a refinance of your home, you generally have the right to cancel. The CFPB explains that the right of rescission applies to most non-purchase-money mortgages, including refinances. If you cancel, you still owe the original loan.
How Much Cash Can You Actually Get?
On a one-unit primary residence, the new loan generally can’t exceed 80% of appraised value. On two- to four-unit principal residences, second homes and investment property, the cap is 75%. The Fannie Mae Eligibility Matrix shows the one-unit principal residence cash-out cap at 80%. Occupancy sets the leverage.
The cap is a percentage of value for the whole new loan. It is not 80% of your equity. A second mortgage or HELOC counts toward it, so the cap limits what a borrower can take more tightly than many people expect.
Here’s the arithmetic in words, no dollars needed. Say your home is appraised at some value. Multiply by 80%. That’s the largest new loan. Subtract the payoff on your first mortgage, any second lien or HELOC you’re retiring, and any closing costs you finance. The remainder is cash. A low appraisal shrinks that remainder directly, and it’s the number first-timers underestimate.
You also keep roughly a 20% equity cushion on a one-unit primary home. That cushion is the arithmetic of the cap.
Who Qualifies? The Checklist
Run through these before applying.
- Time on title: 6 months for a borrower, with exceptions for inheritance and legal awards.
- First-mortgage age: 12 months, note date to note date.
- Credit: the wholesale conventional programs start at a 620 decision score. Some lenders set a higher floor.
- Debt-to-income: the automated finding governs most files, with a total ratio ceiling of 50%. The Selling Guide notes the ratio may be lower on some cash-out files. Manually underwritten loans run 36% or 45% with the reserve and score factors in the Eligibility Matrix.
- Reserves: required in certain cases, for example when the ratio runs above 45% on an automated file.
- Occupancy: sets the leverage cap, as above.
Debts that count toward the ratio include the mortgage, car loans, credit cards, child support, alimony and personal loans. Lenders can apply tighter rules than the agencies. The agency max is a ceiling, not a promise.
One Lane Worth Knowing: Cash-Out With No Mortgage Insurance
On the agency path, mortgage insurance is required above 80% leverage, and the one exception is a wholesale lane that reaches 89.99% leverage with no mortgage insurance. That lane 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. Not every lender offers it, and it isn’t written in Texas. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
If you’ve seen mortgage insurance described as the thing that cancels at 80% and ends at 78%, that’s the standard mechanism for loans above 80% leverage. The no-MI lane sidesteps it. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance on the regular path, which is a program-sheet range, not a quote. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Where the General Rule Breaks
Several named edge cases change the clocks or the product.
- Delayed financing. A cash buyer can skip the 6-month title clock and refinance soon after buying, if the settlement statement shows no financing was used and the source of funds is documented. It’s narrow. Freddie Mac’s Guide section 4301.5 spells out its version.
- Inheritance and legal awards. Divorce or separation awards and inherited property can waive the title clock.
- Buying out a co-owner. Treated as a limited cash-out at both agencies under a written agreement.
- Student loan cash-out. Fannie Mae waives the cash-out price adjustment when proceeds pay student debt and the requirements are met.
- HELOC payoff. Paying off a HELOC used for other spending turns a limited cash-out into a full cash-out.
- Listed for sale. A home that is listed for sale at disbursement is generally not eligible, so confirm the current agency guide with your loan officer.
- Manufactured homes. Single-width homes are not eligible for cash-out. Multi-width homes face lower caps.
- HomeReady. Limited to purchase or limited cash-out. No cash-out option.
- Texas. A cash-out on a homestead is capped at 80% of the home’s value by the state constitution, and the wholesale no-MI lane isn’t written there. Some other states add their own rules too.
One more mislabel: “limited cash-out” is the rate-and-term refinance. It allows only small incidental cash, and Fannie Mae and Freddie Mac set different limits, so it is not a true cash-out.
What the Decision Looks Like in Practice
The decision turns on three questions. First, is your current loan cheap enough that replacing all of it costs more than it’s worth? A cash-out resets the whole balance, not only the new money. Second, will you stay long enough to recover closing costs? The Closing Disclosure shows them, and they come out of your cash if financed. Third, what’s the cash for?
The CFPB warns that a cash-out refinance may extend the time it takes to pay off your mortgage. And the CFPB’s research on cash-out borrowers found many use the money to pay down credit card and auto debt. Credit scores rose at first, then gradually worsened. Paying off the card doesn’t fix the habit that ran it up.
Compare against a HELOC, which keeps your first mortgage and adds a second payment. Cash-out may be more or less expensive depending on terms. The right answer depends on your existing loan and your plans.
A practical prep list for a first-timer:
- Your most recent mortgage statement and payoff details for every lien.
- Proof of income and assets, and a list of monthly debts.
- Your homeowners insurance information.
- The date you bought the home and the date of your current loan.
- Questions for the lender: how are costs shown on the Loan Estimate, what leverage does the file run at, and what does a low appraisal do to my cash?
Key Terms Defined
Seasoning: The minimum time you must hold the home or the current loan before a cash-out is allowed.
LTV (loan-to-value): The new loan amount divided by the appraised value of the home.
DTI (debt-to-income): Your monthly debts divided by your monthly income.
Appraisal: A professional opinion of your home’s value that sets the loan cap.
Rescission: Your right to cancel most refinances after signing, with the original loan still owed.
Limited cash-out: A refinance that pays off the old loan and costs but returns only small incidental cash.
Frequently Asked Questions
Can I take 80% of my equity out?
No. The 80% cap applies to the home’s appraised value across the whole new loan, including every lien. If you owe a large share of the value already, the cash left over is small.
How long do I have to own my home before a cash-out?
Six months on title for at least one borrower, and the first mortgage being paid off must be at least 12 months old. Delayed financing, inheritance and legal-award exceptions can change the title clock.
Does a cash-out refinance need mortgage insurance?
Mortgage insurance is generally required above 80% leverage, and a standard cash-out stops at 80%, so it usually doesn’t apply. The wholesale no-MI lane reaching 89.99% is the one exception, with its own conditions.
What if the appraisal comes in low?
Cash shrinks, because the cap is a percentage of the appraised value. Ask the lender about appraisal reconsideration with recent comparable sales if the figure looks off.
Can I cancel after closing?
Generally yes. The right of rescission applies to most refinances of a home you live in, and money you paid must be returned.
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. Program figures are subject to lender guidelines and full file review, and 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 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.
For the program’s current guidelines, see conventional loan programs.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. Fannie Mae SEL-2023-01 announcement
4. Fannie Mae Eligibility Matrix
5. Freddie Mac Guide section 4301.5
6. CFPB Using home equity guide
7. CFPB’s research on cash-out borrowers
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Conventional Cash-Out Refinance Keep Your First Mortgage in Place? · Can a Trust Hold Title on a Conventional Cash-Out Refinance? · Cash-Out Refinance Options on a Conventional Loan You Already Have
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.