The Quick Read: On a conventional loan for a one-unit primary residence, the minimum equity is 20%. Put another way, the new loan can reach 80% of the home’s value, and no further. Two- to four-unit principal residences, second homes and investment property cap at 75%. One wholesale lane goes higher, and a few programs need almost no equity but hand back little or no cash. Everything depends on which program you use, so start there.
What Does “Minimum Equity” Actually Mean?
Minimum equity is the share of your home’s value you must still own after the cash-out loan closes. It is not the share you must have before you apply.
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: 7.18% as of November 5, 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.
Equity is the appraised value minus what you owe. A cash-out refinance replaces your current mortgage with a larger one and pays you the difference. The lender caps the new loan as a percentage of value, called the loan-to-value ratio (LTV). The cap protects the lender if prices fall. It protects you too.
Here is the part people get wrong. The 80% cap applies to the home’s value, not to your equity. You cannot borrow 80% of your equity. You can borrow up to 80% of the value, and the payoff of your old loan comes out of that first.
Across the wholesale programs Lendmire places files with, the conventional caps look like this:
- 80% LTV on a one-unit principal residence.
- 75% on two- to four-unit principal residences, second homes and investment property.
- Occupancy sets the leverage. The lender writes a cash-out on all three property types, but the cap shrinks as the risk grows. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
For the full lineup, see Lendmire’s cash-out refinance programs page. All figures here are subject to lender guidelines and full file review, and none is a commitment to lend.
How Much Cash Is Left at the Minimum?
The cash you can take equals the cap minus what you owe, minus every cost that rides along in the loan. That is the whole formula.
Run it in percentages of value. The table below assumes a one-unit primary residence at the 80% conventional cap.
| What you owe now | Cap | Room before costs |
|---|---|---|
| 50% of value | 80% | 30% of value |
| 70% of value | 80% | 10% of value |
| 78% of value | 80% | 2% of value |
| 82% of value | 80% | None. Pay down first. |
“Room before costs” is the gross figure. It is not what lands in your account. Closing costs financed into the loan come out of the cash. So does any second lien the new loan must pay off. The loan’s own prepaid items for taxes and insurance come out too.
Picture a homeowner at 78%. The gross room is 2% of value. After costs, the check can shrink to almost nothing, and the refinance may not be worth doing. Now picture a homeowner who owes 60%. The room is 20% of value, and costs take a small bite out of a large number.
One more wrinkle. The appraisal sets the value the cap is applied to. At an 80% cap, each dollar of value an appraiser removes cuts your maximum loan by about 80 cents. Your available cash falls by that amount. A home you thought was worth more can turn a workable file into a thin one.
Step by Step: How the Loan Is Underwritten
Underwriting is the lender’s review of whether the loan fits its rules. For a cash-out at the minimum, the steps run in this order.
1. Classify the loan. If your proceeds are unrestricted or exceed a small incidental allowance, it is a cash-out. A home owned free and clear is still a cash-out.
2. Set the cap. Pick the program and the occupancy. That sets the maximum LTV.
3. Check the seasoning. On the standard conventional path, the first mortgage being paid off must be at least 12 months old, counted 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. The wholesale no-mortgage-insurance lane carries its own six months of seasoning in place of this general test.
4. Order the appraisal. The appraised value drives everything else.
5. Review credit, income and ratios. The wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total debt-to-income ceiling of 50%. Manually underwritten loans run tighter, at 36% or 45%. Higher ratios can trigger reserve requirements, meaning cash left in the bank after closing.
6. Price the loan. Cash-out loans carry risk-based pricing add-ons that depend on LTV and score. The Loan Estimate shows the result.
7. Disburse. The new first lien pays off the old loan and any liens being cleared. You receive what remains.
That is the sequence. The outcome turns on appraised value, your current balance, the program cap, credit score, ratios, occupancy and seasoning.
Which Structures Reach Lower Equity?
Several programs reach lower equity, but they do not all deliver cash. Sort them by what you need.
| Program | Cash to you? | Equity position |
|---|---|---|
| Conventional cash-out, one unit | Yes | Keep 20% (80% LTV) |
| Conventional, 2-4 units, second home | Yes | Keep 25% (75% LTV) |
| Wholesale no-MI lane | Yes | Keep just over 10% (89.99%) |
| FHA cash-out | Yes | Keep 20% (80% of adjusted value) |
| VA cash-out | Yes | Far higher ceiling; lender caps vary |
| FHA Streamline, VA IRRRL | No | Little or no equity needed |
The no-MI lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. The terms are narrow. It needs a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming loan balance. It also has its own six months of seasoning. This is the one exception to the usual rule that conventional loans need mortgage insurance above 80% LTV. It is not written in Texas. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
FHA cash-out is for owner-occupied principal residences. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
VA. A VA-backed cash-out requires a Certificate of Eligibility and that you live in the home. VA’s ceiling is far higher than conventional or FHA, but VA loans come through private lenders, and many set their own lower caps. Do not assume the top number is available.
The no-cash lanes. The FHA Streamline and the VA IRRRL refinance an existing FHA or VA loan. Neither puts cash in your hand. Each can work with little equity because it skips most of the usual review, and each requires a net tangible benefit, meaning the new loan must measurably help you. The IRRRL charges a 0.5% funding fee unless you are exempt. If cash is the goal, they do not help.
Where the General Rule Breaks
Most of the surprises sit in a few named edge cases. Know these before you assume the 80% rule covers you.
Delayed financing. Buy a home with cash, and you can cash out before the normal waiting period. Fannie Mae’s cash-out topic names this exception, and Freddie Mac has its own version.
A paid-off home. Owning free and clear does not make the loan “limited.” Freddie Mac’s cash-out rule treats a free-and-clear property as a cash-out. The same section requires at least one borrower to have six months on title, subject to exceptions.
Limited cash-out is not zero cash. A rate-and-term refinance can hand back a small incidental amount. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000, and Freddie Mac allows the greater of 1% of the new loan amount or $2,000. A rate-and-term loan on a one-unit primary residence can carry higher leverage than a cash-out loan, but the cash back is incidental.
Paying off a HELOC. A home equity line of credit that was not used to buy the home converts a rate-and-term refinance into a cash-out. Only purchase-money second liens stay in the rate-and-term lane, so paying off such a line moves the loan under the cash-out leverage limit.
Co-owner buyouts. Buying out a co-owner under a written agreement is treated as a limited cash-out transaction at both agencies. It is not a cash-out loan in the usual sense, so the rate-and-term equity rules apply.
Texas. A cash-out on a Texas homestead, known as a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. State rules can add limits elsewhere, so a lender in your state will confirm what applies.
Ineligible transactions. Some loan types cannot be refinanced as cash-out at all, such as a payoff of an installment land contract.
What If You’re a Little Short?
If you are a few points over the cap, you have four real options.
- Pay down the balance. At 82% owed, a principal payment that gets you to 80% makes the loan possible, though it leaves you with little cash.
- Wait for the appraisal to catch up. Rising values lift the denominator. Falling values do the opposite.
- Reconsider the program. Check the no-MI lane if you meet its terms. Check FHA or VA if you have an existing loan of that type.
- Right-size the ask. If you only need a modest sum, a smaller second lien may fit better than refinancing the whole first mortgage.
Be careful with improvements. Spending money to raise value can help, but only the appraiser’s number counts. A renovation that the appraiser does not credit adds cost and no equity.
Before you apply, pre-check your position. Take your best estimate of value, multiply by the cap, and subtract your balance. Then subtract a rough allowance for closing costs and any second lien. If the result is thin, ask whether the loan is worth doing.
Why Do Minimum-Equity Files Get Denied?
Files sitting right at the cap fail for a short list of reasons. The fixes are usually practical.
- The appraisal came in low. Fix: reduce the loan amount, or pay down to the new cap.
- Seasoning is short. The first mortgage or title is under 12 or 6 months. Fix: wait, or ask whether an exception applies.
- Ratios run too high. Debt-to-income is above the ceiling for your score. Fix: pay off a debt or document more income.
- A second lien blocks it. A HELOC must be paid or subordinated. Fix: count it in the payoff before you commit.
- Occupancy does not match the program. Fix: pick the program that fits how the home is used.
- Reserves are thin. Higher ratios can trigger a reserve requirement. Fix: document the assets you have. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Is Borrowing at the Minimum a Good Idea?
It depends on what the money does. Sometimes the answer is no.
The Consumer Financial Protection Bureau‘s home equity guide says lenders typically want you to keep 10% to 20% of your home’s value as equity. It also says a cash-out replaces the whole loan. Your rate and other terms change, your payment may rise, and the payoff date may move out. If your current loan has terms you like, you give them up.
Using cash to clear credit cards turns unsecured debt into debt secured by your house. Miss payments and the home is at risk. A cash-out also ties your equity cushion to the market. If prices dip after you have borrowed up to the cap, you have little buffer.
Compare the full cost of the new loan against the old one, not just the monthly payment. Lower payments can hide higher total costs.
| Option | What changes | Best fit |
|---|---|---|
| Cash-out refinance | Replaces your first mortgage | Your current terms are not worth keeping |
| Home equity loan | Adds a second lien, fixed amount | You like your first mortgage |
| HELOC | Adds a second lien, revolving | You need cash in stages |
Key Terms Defined
Equity: the appraised value of your home minus what you owe on it.
LTV (loan-to-value): the new loan amount divided by the home’s value, shown as a percentage.
Limited cash-out refinance: a refinance that pays off your existing loan and costs, with only a small incidental amount back to you. Some lenders call it a rate-and-term refinance.
Seasoning: the waiting period a lender wants between owning the home, or taking the existing loan, and refinancing it.
Mortgage insurance: coverage that protects the lender. On the agency conventional path, it applies above 80% LTV. The wholesale no-MI lane described above is the exception. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Net tangible benefit: the measurable gain a streamline refinance must show, such as a better loan structure.
Your Next Step
Gather your most recent mortgage statement, a rough value estimate and the date you took title. Then run the cap math above. 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 get a cash-out refinance with less than 20% equity?
Usually not on a conventional one-unit primary residence. The cap there is 80% LTV. The exceptions are a wholesale lane that reaches 89.99% with no mortgage insurance, subject to its score, ratio and loan-type terms, and VA cash-out, where the ceiling is higher. FHA also caps at 80% of adjusted value.
Does a limited cash-out refinance give me any cash?
A small amount. Beyond that allowance, the loan counts as a cash-out and the lower cap applies.
Does paying off my HELOC keep the refinance limited?
Only if the HELOC was used to buy the home. A line used for anything else turns the loan into a cash-out, which lowers the maximum LTV from 95% to 80% on a one-unit primary residence.
What happens if my appraisal comes in low?
Your available cash drops. At an 80% cap, every dollar of lost value costs you about 80 cents of loan. You can lower the loan amount, pay down the balance, or wait and reapply when values move.
Do I have to refinance with my current lender?
No. You can shop any lender, and a broker can compare several wholesale lenders on your behalf. The Loan Estimate lets you compare full terms side by side.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. 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. U.S. Department of Veterans Affairs, Cash-Out Refinance Loan
2. Fannie Mae Selling Guide, Cash-Out Refinance Transactions
3. Freddie Mac Guide §4301.5, Cash-out refinance Mortgages
4. Consumer Financial Protection Bureau
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 vs Home Equity Loan With Mortgage Protection Insurance in Place · How to Plan and Use a Cash-Out Refinance to Access Cash From Home Equity · How Much Cash Comes Out of a Cash-Out Refinance With High Equity and Low Income?
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.