The Quick Read: The most you can borrow is set by the appraised value of the home and the leverage cap for your occupancy type, not by the equity you have. On a conventional loan, the cap is 80% of value on a one-unit principal residence and 75% on two- to four-unit homes, second homes and investment property. Payoffs, other liens and financed costs come out of that cap before any cash reaches you, and every figure is subject to lender guidelines and full file review.
What a Cash-Out Refinance Is, and What It Is Not
A cash-out refinance replaces your current mortgage with a new, larger one and pays you the difference. Fannie Mae’s Selling Guide describes it as a new first mortgage that pays off existing liens on the same property, or places a new mortgage on a home that has no lien. A home owned free and clear is treated as cash-out too.
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.
It differs from a rate-and-term refinance, which is the limited cash-out lane. That loan pays off the first mortgage, the closing costs and a purchase-money second lien, with only incidental cash back. Pay off a second lien that was not used to buy the home and the loan becomes a cash-out. That one detail changes the leverage cap and the pricing, and it catches borrowers who assumed they were doing a simple rate-and-term.
Streamlines are not cash tools either. The FHA Streamline and the VA IRRRL are for people who already hold an FHA or VA loan and want to change its terms. Neither one lets you take equity out as cash.
Lendmire’s cash-out refinance programs page covers the programs a homeowner can compare. This article covers the mechanics behind them.
How Much Can You Actually Borrow?
The ceiling is one formula: appraised value times the leverage cap, minus everything that has to be paid off. What is left is your cash.
Across the wholesale programs Lendmire works with on conventional files, the caps look like this:
| Occupancy | Cash-out LTV cap |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
| Investment property | 75% |
Those caps match the cash-out rows on Fannie Mae’s Eligibility Matrix. Occupancy decides the leverage. A cash-out can be written on a primary residence, a second home or an investment property.
The cap applies to the whole new loan, including any other liens counted in the combined ratio. It is not a cap on your equity. If the new loan can be only 80% of value, you can pull out only the slice that sits between your payoff and that line, however much equity the home holds beyond it.
Where the Paper Maximum Shrinks
Think of it in five steps:
1. Take the appraised value.
2. Multiply by the cap for your occupancy type.
3. Subtract the payoff of your current first mortgage.
4. Subtract any other liens you must clear, such as a home equity line.
5. Subtract financed closing costs and any prepaid items rolled into the loan.
The remainder is what reaches you. Borrowers often quote step two as if it were the answer. It is the starting line.
The No-Mortgage-Insurance Lane
Mortgage insurance is required above 80% LTV on the agency path, and the wholesale no-mortgage-insurance cash-out lane is the one exception. Across the wholesale programs Lendmire places files with, that lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% total ratio. It must be a thirty-year fixed on a primary residence, at a conforming balance, with its own six months of seasoning. It is not written on a Texas homestead, where a cash-out is capped at 80% of the home’s value by the state constitution. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Qualifying: What the Lender Checks
Underwriting looks at six things. Each one can lower the amount or end the file.
| Factor | Why it matters | How to improve it |
|---|---|---|
| Appraised value | Sets the ceiling | Document upgrades and recent sales |
| Credit score | Sets eligibility and cost | Pay down cards, fix errors |
| Total debt ratio | Measures affordability | Pay off small installment debts |
| Reserves | Cushion after closing | Keep liquid funds documented |
| Seasoning | Proves ownership history | Wait out the clocks |
| Occupancy | Sets the leverage cap | Report it accurately |
Credit and Ratios
The wholesale conventional programs start at a 620 decision score. An adjustable rate under manual underwriting starts at 640. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, depending on the reserve and score factors in the Eligibility Matrix.
Those figures are the starting floor for every conventional file. A cash-out loan carries more leverage risk than a no-cash-out refinance, so a score that only just clears the floor leaves little room here.
Reserves matter too. Per the Fannie Mae matrix notes, minimum reserves apply to cash-out files when the automated finding shows a total ratio above 45%. The matrix’s own reserve language is the source for that threshold. Those reserve funds need statements behind them.
Seasoning
Two clocks run on a conventional cash-out. The first mortgage you are paying off must be at least 12 months old, measured note date to note date. You must also have been on title for 6 months. The exceptions are delayed financing, inheritance and legal awards.
Delayed financing is the one people ask about. It covers a recent all-cash purchase, documented by the original settlement statement and proof of where the funds came from. It is still a cash-out loan, priced and capped as one. It does not turn into a rate-and-term refinance.
Applying: The Steps in Order
1. Choose the loan type. Conventional, FHA or VA. Each has its own cap and its own paperwork.
2. Confirm occupancy and ownership. Know how you will report the home. A principal residence gets the highest leverage.
3. Gather documents. Typical items are two recent pay stubs and tax returns for a salaried borrower, or business returns and a year-to-date profit statement for a self-employed one. Add asset statements, a current mortgage statement, homeowner’s insurance and ID. A veteran adds a Certificate of Eligibility.
4. Apply and receive disclosures. On a consumer mortgage you receive a Loan Estimate and later a Closing Disclosure. Compare them line by line against what you were told.
5. Order the appraisal. The value that comes back drives the whole loan amount.
6. Underwriting. The lender reviews credit, ratios, reserves, title and the appraisal. Expect requests for explanation letters on large deposits or new debts.
7. Closing and rescission. On a refinance of your principal dwelling, you generally have until midnight of the third business day after closing to rescind, per the CFPB. Saturdays count as business days. Sundays and legal public holidays do not. Cancelling does not erase your old loan.
Ways to Raise the Amount Before You Apply
You cannot change the cap. You can change what sits under it.
- Pay off small debts first. A lower total ratio can mean fewer conditions and stronger standing. Small installment debts, such as a car loan or a store card, are the usual candidates, since clearing one can lower the ratio without draining your reserves.
- Correct credit report errors. A higher score improves eligibility and lowers the cost of high leverage. Scores affect loan-level pricing, which grows with leverage and shrinks with score.
- Keep reserves documented. Statements that show the same balance across the review period are easier to accept than recent transfers.
- Prepare for the appraiser. Gather a list of improvements, receipts and nearby recent sales. Value is the biggest lever on the amount.
- Check what you owe. A second lien or equity line must be cleared in most cash-out files. A smaller payoff means more cash.
- Watch the clocks. Applying a few weeks early can trigger a seasoning issue that a short wait avoids.
When the Appraisal Comes in Low
A low appraisal shrinks the ceiling directly. If value comes in 5% lower, the allowed loan drops with it, and your cash drops by more than 5% because the payoff stays fixed.
You have four options. Ask the lender about a reconsideration of value with better comparable sales. Reduce the cash you take. Wait and reapply when value or your balance changes. Or move to a program with a different cap, where that fits the occupancy.
Where the General Rule Breaks
- Texas homesteads. A cash-out on a Texas homestead, the Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. The no-mortgage-insurance wholesale lane is not written there.
- Two- to four-unit homes. The cap drops to 75% even if you live in one unit.
- FHA. HUD’s handbook records the maximum LTV and CLTV for cash-out as 80% in a handbook update transmittal. FHA applies the cap to an adjusted value, and the current handbook text governs, so confirm it before relying on the number.
- VA. VA’s cash-out page sets the tests as a valid Certificate of Eligibility and your intent to live in the home. VA does not fund loans, and private lenders can set tighter limits than VA does. The funding fee on a cash-out differs from the IRRRL fee and varies with first or later use.
- Student loan payoff. Fannie Mae has a feature that allows student loan payoff through the refinance, with the cash-out pricing adjustment waived when its requirements are met. Standard cash-out caps still apply.
- Renovation and energy loans. Some programs treat proceeds used only for eligible improvements as no-cash-out. Payoff of an energy-retrofit lien such as PACE can also change the loan’s treatment.
Should You Borrow the Maximum?
Not always. The CFPB’s housing guide warns that a cash-out may extend the time it takes to pay off your mortgage, and that your payment may rise because you replace your mortgage with a larger loan.
You also give up your old loan’s terms. Closing costs, mortgage insurance above 80% and loan-level pricing reduce the net cash or raise the balance. Borrowing the full amount for a project that raises the home’s value is a different decision from borrowing it to cover everyday spending.
Equity loans and home equity lines leave your first mortgage in place. They are the usual alternatives, and the right choice depends on what the existing first loan carries.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
CLTV: The same ratio, counting all liens on the home, not only the first mortgage.
Seasoning: The length of time you have owned the home or held the loan being paid off.
Delayed financing: An exception that lets a recent all-cash buyer take a cash-out loan sooner than the usual clocks allow.
Total ratio (DTI): Your monthly debts, including the new mortgage, divided by your gross monthly income.
Rescission: Your right to cancel certain refinances within three business days of closing.
Frequently Asked Questions
Can I borrow 80% of my equity on a cash-out refinance?
No. The 80% cap is on the new loan as a share of the home’s value, not on equity. Your payoff, other liens and financed costs come out first. What remains is your cash.
How long do I have to own the home before a cash-out?
For a conventional loan, you must 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 awards are exceptions. Those clocks are the agencies’ rules, and each lender applies them to the file.
Can I take cash out of a second home or rental?
Yes. Occupancy sets the leverage, and the cap is 75% on second homes and investment property. A principal residence gets 80% on a one-unit home.
What happens if I change my mind after closing?
You generally have until midnight of the third business day to rescind a refinance on your principal dwelling. If you cancel, you still owe the original loan. Missing or seriously wrong disclosures can extend the right to cancel.
Does a bigger cash-out cost more?
Generally yes. Pricing adjustments grow with leverage and shrink with credit score, and mortgage insurance applies above 80% LTV except in the one no-mortgage-insurance wholesale lane. The Loan Estimate shows the actual costs for your file.
Next Step
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. You can reach the team at 828-256-2183.
For your own numbers, request a scenario review with Lendmire.
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. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Eligibility Matrix (media link)
5. HUD Handbook 4000.1 update transmittal
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How the Cash-Back Line Works on a Cash-Out Refinance · How a Cash-Out Refinance Works for a Big Expense · Cash-Out Refinance Requirements When You Are Relocating
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.