The Quick Read: For most borrowers at the minimum score, the cash-out refinance is the clearer path, because its rulebook is known, while a home equity loan is the better choice only when you want to keep your current first mortgage and need a smaller lump sum. A cash-out refinance replaces your first mortgage with a larger one, so it fits a borrower who wants one loan and clears the score floor. A home equity loan adds a second mortgage on top of the first. At the minimum score, neither is automatic, because each lender sets its own cushion and overlays.
Across the wholesale conventional programs Lendmire places files with, the starting decision score for a cash-out refinance is 620. Nobody can honestly tell you a universal minimum for the second-lien lane, so this article won’t.
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.
Side-by-Side
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| Structure | New first mortgage replaces the old one | Second mortgage added to the first |
| Existing mortgage | Paid off | Stays in place |
| Leverage | 80% LTV on a one-unit primary residence | Lender-set equity cushion |
| Credit floor | 620 decision score to start | Set by each lender |
| Mortgage insurance | Above 80% only on the agency path | Not the usual structure |
| Occupancy | Primary, second home or investment; occupancy sets leverage | Lender-set |
| Documentation | Full file: income, assets, appraisal | Income, credit and valuation |
| Payments | One | Two |
A few notes on that table. The leverage figure is for a conventional loan, and two- to four-unit homes, second homes and investment properties are capped at 75%. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score, but only on a primary residence with a conforming balance and a thirty-year fixed loan. All figures are subject to lender guidelines and full file review, and none is a commitment to lend.
How a Minimum Score Really Works
A published minimum is where the conversation starts, not where it ends. The loan program sets a floor. Then the lender adds its own overlays, and the automated finding on your file weighs the score together with the rest of your profile.
On the conventional cash-out side, a 620 score can clear the entry point. Yet a lower score often means a lower leverage cap or a higher cost on the new loan, because Freddie Mac says its cash-out credit fee is tied to score and LTV. That is risk-based pricing. The same logic shapes how lenders treat a borrower sitting right at the line.
Compensating factors matter here. Lenders weigh these together:
- Equity left after the loan. More cushion helps a borderline file.
- Debt-to-income. Conventional files can carry a total ratio up to 50% when the automated finding supports it.
- Reserves. Cash left after closing can offset a thin score.
- Income stability. A steady, documented history reads better than a recent change.
The VA states no minimum score on its pages, only “satisfactory credit” plus enough income and a valid Certificate of Eligibility. Lender overlays then decide the practical floor. FHA works the same way: some lenders set a higher floor than the program itself.
When a Cash-Out Refinance Is the Better Fit
Choose the refinance when you want one payment, one lender relationship and a clean structure. A cash-out refinance is a new first mortgage with no restrictions on how you use the money. It suits a few situations:
- You are rebuilding the whole loan anyway. If your current mortgage no longer fits your budget or term, replacing it does two jobs at once.
- You need a larger sum. The new loan can reach 80% of value on a one-unit primary residence, which often releases more than a second lien allows.
- You own the home free and clear. Freddie Mac treats a refinance of a paid-off home as a cash-out transaction, so this lane is the natural one.
- You qualify for the no-MI wholesale lane. At a 680 score and a 50% ratio on a conforming, thirty-year fixed primary residence, that lane reaches just under 90% of value without mortgage insurance. It carries its own six months of seasoning.
The tradeoff is that the whole balance gets re-priced and re-termed. If your existing mortgage has favorable terms, replacing it just to pull cash may cost you more than it gains. Closing costs also apply to the entire new loan, not just the cash portion.
Seasoning is the other gate. The first mortgage being paid off must be at least 12 months old, counted note date to note date. At least one borrower must have been on title for six months, with exceptions for delayed financing, inheritance and legal awards. Lendmire’s cash-out refinance programs page lays out how those programs fit together.
When a Home Equity Loan Is the Better Fit
Choose the home equity loan when your first mortgage is the asset you want to protect. A home equity loan is a second mortgage with its own payment, paid on top of the first. The money arrives as a lump sum, and the rate may be fixed or adjustable.
It tends to fit when:
- Your first mortgage is the keeper. If its terms are better than anything available today, leaving it untouched is the point.
- You need a modest sum. A smaller second lien avoids re-pricing the whole balance.
- You are not yet at the 12-month seasoning mark on your first loan. A second lien does not depend on that rule the same way.
- You can handle two payments comfortably.
The tradeoff is real. Because the home secures both loans, missed payments could lead to foreclosure. The same CFPB guide says lenders typically require you to keep 10% to 20% of your home’s value as equity. That cushion limits how much you can borrow, and a borderline score may shrink the cushion lenders will accept. This is an older publication, so treat the range as typical rather than fixed.
One more point on scope. Because lenders write those terms individually, a home equity loan is often best priced by checking with your current lender or a credit union as well.
Which One Is Easier at the Minimum Score?
Usually the cash-out refinance is easier to predict, because it follows a published program rulebook. The home equity loan is easier to attempt, because it is a smaller bet for the lender but varies widely by lender. Neither is guaranteed.
A simple decision path:
1. Is your first mortgage worth keeping? If yes, lean toward the second lien. If no, lean toward the refinance.
2. Do you need a large sum? A larger need points to the refinance, since it can reach 80% LTV on a one-unit primary home.
3. Is your score right at 620? Expect the refinance to depend heavily on leverage and pricing. Strengthen equity, reserves and ratios first.
4. Is the home free and clear? Then the cash-out lane is the standard route.
5. Are you under the line? See the next section. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Just Below the Minimum: A Short Plan
Start by pulling your own credit reports and fixing errors. Pay revolving balances down before a lender checks your score. Avoid opening new accounts during the process. Then ask a broker to review your file, since a pre-qualification review can show which program fits before you commit to a hard inquiry.
Waiting periods after credit events are agency rules. Conventional guidelines run four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. They can be shorter with documented extenuating circumstances.
Watch for red flags too. Be cautious of stacked fees, pressure to borrow more than you need, or any promise of a “no-cost” loan. When you hear that term, the costs are built into the rate or the balance. Compare the Loan Estimate you receive from each lender side by side.
Key Terms Defined
Cash-out refinance: A new first mortgage, larger than the old one, that pays off the old loan and gives you the difference.
Home equity loan: A second mortgage that adds a lump sum on top of your existing first mortgage.
LTV (loan-to-value): The loan balance divided by the home’s value.
Overlay: A lender’s own rule that is stricter than the program’s published minimum.
Seasoning: The time a loan or title must have been in place before a refinance qualifies.
Mortgage insurance: Coverage on the agency path above 80% LTV. It can be requested off at 80% and ends automatically at 78%. The no-MI wholesale lane described above is the exception.
The Verdict
Pick the refinance if you want to replace the whole loan, need a larger amount, or your first mortgage no longer serves you. Pick the second lien if your first mortgage is worth keeping and your need is modest. At the minimum score, the better answer is usually the one where the numbers hold up after the lender applies its own cushion, so compare the structure rather than the headline.
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 a 620 credit score?
Sometimes. A 620 decision score is where the wholesale conventional programs start, and the automated finding then weighs your leverage, ratios and reserves. At that score, expect a lower leverage cap or higher pricing than a stronger borrower sees. Eligibility is subject to lender guidelines and full file review.
Does a home equity loan have a minimum credit score?
There is no neutral national floor. Each lender sets its own, along with its own equity cushion, which CFPB describes as typically 10% to 20% of the home’s value. Ask each lender directly before applying, and request a soft-pull check where offered.
Can the VA IRRRL take cash out?
No. It is a VA-to-VA streamline for borrowers who already have a VA-guaranteed loan on the property. A VA cash-out refinance is a separate product that can also move a non-VA loan into the VA program, and it goes through a private lender.
Does a cash-out refinance require mortgage insurance?
On the agency path, mortgage insurance generally applies once leverage rises above the conventional threshold. The exception is the wholesale no-MI lane, which reaches a bit higher at a 680 score on a primary residence. Where insurance applies, you can request cancellation once your balance falls to the level the servicer sets against the original value, and the servicer must end it automatically at a later, lower-balance milestone. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Can I refinance a home I own free and clear?
Yes. Freddie Mac classes a refinance of a paid-off home as cash-out. Conventional leverage tops out at 80% on a one-unit primary residence and 75% on two- to four-unit homes, second homes and investment properties.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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.
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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 – Cash-out refinance
4. Freddie Mac Guide §4301.5 (search view)
5. CFPB – Home equity loan vs HELOC
6. CFPB – Using home equity to meet financial needs
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 Get a Higher Loan-to-Value on a Cash-Out Refinance · How Lenders Underwrite a Cash-Out Refinance on a Home You Own · How to Meet Seasoning for a Cash-Out Refinance on a Primary Home
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.