The Quick Read: A cash-out refinance fits the homeowner whose existing first mortgage is worth replacing, because it swaps that loan for a new, larger one. A home equity loan fits the homeowner who wants to keep the first mortgage untouched and borrow a lump sum on top of it. At 70% loan-to-value you have room to use either product, and your existing first mortgage usually decides which one makes more sense. Both put your home on the line as collateral, subject to lender guidelines and full file review.
Here is the honest sorting. If you like your current first mortgage, a home equity loan leaves it alone. If your first mortgage is one you’d happily replace, or you want one payment instead of two, a cash-out refinance does that job. Neither is automatically cheaper. That depends on terms the Loan Estimate will show you.
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.
What “70% Loan-to-Value” Means Here
Loan-to-value (LTV) is your loan balance divided by your home’s appraised value. If you owe 70% of what the home is worth, you hold roughly 30% equity.
Combined loan-to-value (CLTV) adds every lien together. That distinction matters because the two products measure the limit differently:
- Cash-out refinance: a new first mortgage replaces the old one. The program’s LTV cap applies to the entire new loan.
- Home equity loan: a second lien sits behind your first mortgage. The lender sets its own combined limit, and no single agency cap governs it.
The cap isn’t the amount of cash you receive. It’s the ceiling on the whole new loan, including the balance you’re paying off. Across the wholesale conventional programs Lendmire places consumer files with, a cash-out refinance on a one-unit principal residence is written to 80% LTV. So at 70% you’re sitting 10 percentage points under that line, and the cash you can take is the gap between your current balance and the cap, less costs, subject to the appraisal. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
One more mix-up worth clearing. The FTC notes that many lenders prefer you borrow no more than 80 percent of the equity in your home. That is 80% of equity, not 80% of value. They are very different numbers.
Side-by-Side
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| Structure | New first mortgage replaces old | Second lien added on top |
| Leverage limit | 80% LTV, one-unit primary home | Lender’s own combined limit |
| Credit floor | 620 decision score on wholesale conventional | Set by each lender |
| Mortgage insurance | Above 80% LTV only; none at this level | Generally not applicable |
| Occupancy | Primary, second home or investment; occupancy sets leverage | Lender-defined |
| Seasoning | Loan paid off at least 12 months old | Lender-defined |
| Payments | One mortgage payment | Two payments |
| Documentation | Full income, asset and appraisal review | Credit, income, combined LTV, valuation |
Two notes on the table. The seasoning rule means a recent buyer may not be eligible for a cash-out refinance. Lender-defined entries vary, so treat them as the questions to ask, not as answers.
How a Cash-Out Refinance Works at 70%
Freddie Mac defines a cash-out refinance as a mortgage with no specific restrictions on how the proceeds are used. The new loan pays off your old first mortgage, covers costs, and you receive the difference.
Because it’s a brand-new first loan, the whole balance is repriced and its terms restart. That is the central tradeoff. You get one loan, one payment, and a clean slate, but you give up whatever terms your old mortgage carried.
The timing rules matter too. Per Fannie Mae’s seasoning announcement, the first mortgage being paid off must be at least 12 months old, measured from note date to note date, and at least one borrower must have been on title for six months. Exceptions exist, including delayed financing for cash buyers, inheritance and legal awards.
Credit matters. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total debt ratio ceiling of 50%. Cash-out loans also carry a risk-based price adjustment tied to LTV and credit, which Freddie Mac describes on its cash-out refinance product page. It is one reason a cash-out refinance isn’t automatically the cheaper path.
Lendmire’s cash-out refinance programs page lays out the conventional options and the equity each one reaches.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance tends to win in these situations:
- You want to replace your first mortgage anyway. If your current loan has terms you’d like to change, the refinance does that and pulls cash in the same transaction.
- You prefer one payment. A home equity loan adds a second payment on top of your first. A refinance keeps it to one.
- You need a larger sum. With room up to 80% LTV on a one-unit primary home, the first-lien structure can reach more equity than many second-lien limits allow.
- You may refinance again later. The CFPB points out that refinancing a first mortgage gets trickier when a second mortgage exists, because that lender has to agree unless you pay it off with the new loan.
- You are paying off a second lien or an old loan. Folding it into a new first mortgage can simplify the structure. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
There’s also a wholesale lane worth knowing about. On a thirty-year fixed, primary residence, conforming balance, one program reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio, with its own six months of seasoning. Mortgage insurance is otherwise required above 80% LTV on the agency path, and this lane is the one exception. Texas homestead cash-outs are different: the state constitution caps a Section 50(a)(6) loan at 80% of the home’s value, and that wholesale lane isn’t written there. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The flip point is simple. If your existing first mortgage is one you’d be sorry to lose, a refinance means repricing the entire balance, not just the new money. That is where this option stops making sense.
When a Home Equity Loan Is the Better Fit
A home equity loan tends to win in these situations:
- You like your current first mortgage. It stays exactly as it is. Only the new second loan carries new terms.
- You need a defined, smaller amount. The CFPB describes a home equity loan as a lump sum borrowed against your equity, and it usually has a fixed interest rate.
- You’re recently on title. Agency seasoning rules for cash-out refinances can bar a recent buyer. A home equity loan has no agency seasoning rule that applies, though lenders set their own.
- You want to avoid repricing the whole balance. Only the new amount takes on new terms.
Now the downsides, stated plainly. A second mortgage is repaid second if the home is sold to cover debts, which is a real consideration when you weigh the two options. You also take on two monthly payments, which the CFPB says adds to your overall debt burden. Home equity loans may carry upfront fees and costs, so compare more than the monthly payment.
Lendmire is a mortgage broker and works in the first-mortgage world, so a second lien is a separate loan you would arrange on your own. Whichever lender you choose, its own terms are the ones that count.
Thinking Out Loud: The Existing-Mortgage Question
Most of this decision turns on one question: how do you feel about the first mortgage you already have?
If its terms are better than what a new loan would offer, keeping it and adding a second loan may be the stronger play, even with a second payment. If its terms are worse, or you want to change its structure anyway, the cash-out refinance does double duty. And if you’re unsure, that’s a signal to price both and read the Loan Estimate line by line before choosing.
Whichever path you pick, the CFPB’s caution applies. When you use equity to pay off other debts, you aren’t really paying them off. You’re taking out one loan to repay another, and your home becomes the collateral. Lower payments in the short term can cost you more over the full life of the loan.
Cushion, Appraisals and Risk
Borrowing at 70% leaves a cushion, and each product eats into it differently. A cash-out refinance moves your LTV up toward whatever new loan you choose. A home equity loan raises your CLTV by the same logic, since the first mortgage stays put and the second stacks on top.
The cushion matters if values dip. A lower-than-expected appraisal can shrink the cash available under either product, because the limit is a percentage of the appraised value, not of the price you hope for. Borrowers who plan around the maximum cash have the least room for a surprise. The FTC warns that if you don’t repay, the lender can take your home as payment for your debt. That applies to both products equally.
A practical rule: borrow what the project or payoff truly requires, not what the cap allows.
What Each Path Typically Requires
For a cash-out refinance, expect a full file review: income and asset documentation, an appraisal, a credit review against the program’s score floor and ratio ceiling, and the seasoning checks above. Lendmire arranges these loans as a broker through wholesale lenders, and every parameter is subject to lender guidelines.
For a home equity loan, the lender typically orders a valuation, then approves you on credit, income and combined LTV, then funds a lump sum. Specific document lists and steps vary by lender, so ask yours up front.
One more point. Both of these are consumer mortgages, so you’ll see a Loan Estimate and a Closing Disclosure either way. Compare closing costs directionally: a refinance carries a full set of closing costs plus the price adjustment, while a home equity loan may have lighter upfront costs. The only reliable comparison is two Loan Estimates side by side.
Key Terms Defined
Loan-to-value (LTV): Your loan balance divided by your home’s appraised value.
Combined loan-to-value (CLTV): The total of all liens on the home divided by its appraised value.
Seasoning: The minimum time a loan or ownership must exist before a new cash-out refinance is allowed.
Second mortgage: A loan secured by your home that sits behind your first mortgage, including a home equity loan.
Limited cash-out refinance: A refinance that replaces the first mortgage with only small, incidental cash back, a different thing from a full cash-out.
The Balanced Verdict
Neither product wins at 70% loan-to-value. A cash-out refinance fits the homeowner who wants to replace the first mortgage, prefers one payment and may need a larger sum. A home equity loan fits the homeowner who wants to keep a first mortgage they like, needs a defined amount and can handle two payments. A recent buyer may have only one door open, because of the seasoning rules.
If you’re 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 or request a quote.
Frequently Asked Questions
Which is cheaper, a cash-out refinance or a home equity loan?
It depends on the terms. A refinance reprices your whole balance and carries a risk-based price adjustment, while a second loan reprices only the new amount, often at a higher rate because of its lien position. Compare two Loan Estimates.
How much cash can I take out at 70% loan-to-value?
Less than the cap would suggest. On a one-unit primary home, the wholesale conventional cash-out cap is 80% LTV, and that limit applies to the entire new loan, not the cash you receive. Your cash is the room between your current balance and the cap, less costs, and the appraisal drives the final number. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Can I get a cash-out refinance if I just bought my home?
Usually not right away. The loan being paid off must be at least 12 months old, and a borrower must have been on title for six months. Exceptions exist, such as delayed financing for cash buyers, inheritance and legal awards. A home equity loan has no agency seasoning rule, though each lender sets its own.
Does a second mortgage make it harder to refinance later?
Often, yes. The CFPB notes that a second-mortgage lender must agree to a refinance of the first loan unless the second is paid off with the new loan. That is one reason some homeowners prefer folding everything into one refinance.
Do I need mortgage insurance on a cash-out refinance at 70%?
No. Mortgage insurance on the agency path applies above 80% LTV, and a wholesale no-mortgage-insurance cash-out lane reaches 89.99% as the exception, subject to its score, ratio and seasoning conditions. At 70% you’re under both lines. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
For current guidelines and terms, see Lendmire’s refinance programs page.
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. FTC: Home equity loans and home equity lines of credit
2. Freddie Mac Guide Section 4301.5
3. Fannie Mae announcement SEL-2023-01
4. Freddie Mac Cash-Out Refinance product page
5. CFPB: Piggyback second mortgage
6. CFPB: What Is a Home Equity Loan
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 to Prepare a Second Home Cash-Out Refinance for Funding · How to Get a Higher Loan-to-Value on a Cash-Out Refinance · How to Plan and Use a Cash-Out Refinance for Small Home Improvements
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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.