The Quick Read: A cash-out refinance has no down payment of its own. It swaps your current loan for a bigger one, and the difference, after your payoff and closing costs, is the cash you can use. On a conventional loan, the cap is 80% of your home’s value on a one-unit primary residence, and 75% on two- to four-unit homes, second homes and investment property. The cap is the size of the whole new loan, not the cash you receive. Everything below is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
How Does the Cash Get Calculated?
The cash equals your appraised value times the maximum LTV, minus your current payoff, minus closing costs. LTV (loan-to-value) is your loan balance as a percentage of your home’s value. The cap covers every lien on the home combined.
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.
Run it in words. Say your home appraises at a given value, and the program allows 80% of it. Subtract what you owe on the first mortgage and any second lien. Subtract the costs of the new loan. What is left is your net cash, and it is smaller than the gross figure most people picture.
That net figure is your ceiling. It is not a promise. The appraisal sets the value, the value sets the loan size, and the loan size sets the cash. A low appraisal shrinks all three.
What Does the Lender Check, Step by Step?
Underwriting follows a predictable order. Each step can shrink the cash or stop the file.
1. Equity check. You estimate value times the cap, minus the payoff and the closing costs. This is your starting guess.
2. Eligibility clocks. The first mortgage being paid off must be at least 12 months old, counted note date to note date. You also need to have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
3. Documents. Expect income, assets, credit, proof of occupancy and a stated purpose for the cash.
4. Appraisal. The appraised value fixes the maximum loan.
5. Credit and ratios. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs the ratio on most files, with a total ratio ceiling of 50%. A ratio is your total monthly debts divided by your gross monthly income.
6. Closing costs. Closing costs come out of your net cash, whether you pay them at closing or roll them into the loan. Your Loan Estimate and Closing Disclosure show them line by line.
7. Closing and the right to cancel. On a refinance of your home, you generally get a three-business-day window to cancel before funds are disbursed. If your next purchase closes soon after, plan around that gap.
Lendmire’s cash-out refinance programs page lays out the program options in more detail.
What Is the Rule on Time in the Home?
Conventional cash-out requires at least one borrower to have been on title for six months. Both Fannie Mae’s Selling Guide and Freddie Mac set this seasoning rule for cash-out refinances. Fannie Mae also names a delayed financing exception for a recent all-cash buyer, who can cash out inside six months if the purchase and the source of funds are documented.
FHA cash-out is stricter, since it generally requires a year of owning and living in the home. VA cash-out is for owner-occupied homes. If you bought recently, timing may decide your path before equity does.
What Do the Different Structures Look Like?
Not every refinance can hand you cash. This table shows which ones can.
| Option | Cash to you | Best use |
|---|---|---|
| Conventional cash-out | Yes, up to the cap | Funding a down payment |
| Rate-and-term (limited cash-out) | Incidental only | Changing loan terms |
| FHA Streamline | Essentially none | Existing FHA loan |
| VA streamline refinance | Essentially none | Existing VA loan |
A refinance pays off your first mortgage, your closing costs and any purchase-money second lien. Cash back is capped at a small amount. Fannie Mae’s limit is the lesser of 2% of the new loan or $2,000. Take more than that and the loan becomes a full cash-out.
FHA Streamline and the VA IRRRL are built for existing government loans. They need no full appraisal in most cases, and they are payment-reduction tools, not equity tools. If you want equity from a VA home, the VA Cash-Out Loan is the program, and a funding fee generally applies unless you are exempt. You can pay that fee in cash or finance it, and financing it raises your balance.
How Does Occupancy Change the Cap?
Occupancy sets the leverage. A cash-out can be written on a primary residence, a second home or an investment property. The caps differ:
- One-unit primary residence: 80% LTV.
- Two- to four-unit primary residence, second home, investment property: 75% LTV. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Do not apply the primary-home cap to a home that will become a rental. The Fannie Mae Eligibility Matrix lays out caps by occupancy and unit count.
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed rate, a primary residence and a conforming balance. It has its own six months of seasoning. It is the one exception to the usual rule that mortgage insurance applies above 80% LTV. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution, and that lane is not written there. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
How Do You Reverse-Size the Refinance?
Start with the down payment the next home needs, then work backward. This is the step most guides skip.
1. Write down the next home’s price and the down payment percentage your loan program asks for. On the agency path, the purchase lanes run from a low down payment for first-time buyers on a one-unit primary residence, to a somewhat larger one for other primary-residence buyers, to higher down payments for second homes and investment property.
2. Add the next purchase’s closing costs and a cash cushion.
3. Add the closing costs of the refinance itself, since those come out of your proceeds.
4. Compare that total to your net cash ceiling from the earlier formula. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
If the total is higher than the ceiling, the plan does not work as drawn. You have three choices: lower the target price, add savings, or pick a different path.
Remember that LTV caps work against your equity too. If you owe a large balance on your current home, an 80% cap may release little cash. Lenders typically want you to keep a real equity cushion, and the CFPB’s home equity guide notes lenders commonly expect you to keep 10% to 20% of your home’s value as equity.
What Can Go Wrong?
Four problems come up often enough to plan for.
A low appraisal. The cash shrinks dollar for dollar with the value. Build a buffer into your plan.
Two payments at once. The next lender counts your new, larger payment on the current home in your debt ratios. You may also carry the old payment and the new one together. Both loans feed your qualification for the next one, so talk to a loan officer about the order of the two transactions.
Reserves. Reserves are money left in the bank after closing. Lenders may ask for them, and the amount depends on the file and the lender’s guidelines. The same cash cannot count as both your down payment and your reserves. Spend it once.
Paper trail. Lenders expect the settlement statement and the bank deposit to show where the money came from. Keep both.
When Should You Skip This?
A cash-out refinance is the wrong tool in several situations. Skip it if:
- the net cash does not cover the down payment, closing costs and a cushion;
- the new payment, plus the next home’s payment, strains your ratios;
- you plan to sell the current home soon, since a home listed for sale may not be eligible;
- your existing loan is a government loan you could keep, and the cash gap is small enough to cover with savings.
Mortgage insurance matters here too. On the agency path it is required above 80% LTV, except in the wholesale no-MI lane described above. Your servicer must end it automatically at 78%, and you can request cancellation at 80% with a good payment history. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Key Terms Defined
LTV (loan-to-value): your total mortgage debt as a percentage of your home’s appraised value.
Cash-out refinance: a new, larger mortgage that pays off the old one and gives you the difference in cash.
Limited cash-out (rate-and-term): a refinance that changes your loan terms and allows only small cash back.
Seasoning: the waiting period a loan or title must age before a new refinance is allowed.
Reserves: liquid money you keep after closing, counted in months of payments.
Delayed financing: a cash-out available to a recent all-cash buyer inside the usual six-month title window.
Right of rescission: your three-business-day window to cancel a refinance of your home.
Frequently Asked Questions
Can I use cash-out refinance money as a down payment?
Yes. Federal rules do not restrict how you use full cash-out proceeds. Keep the settlement statement and bank deposit so the next lender can trace the funds. Remember the money is borrowed against your home.
Does the 80% cap mean I get 80% of my home’s value in cash?
No. The cap is the total new loan as a share of value. Your cash is what remains after paying off your current loans and closing costs.
Can I get cash out right after buying my home?
Usually not. Conventional loans generally require six months on title, and the loan being paid off must be at least 12 months old, with exceptions such as delayed financing for all-cash buyers. FHA asks for 12 months of ownership and occupancy.
Will my cash-out refinance affect qualifying for the next home?
Yes. The larger payment on your current home counts in your debt ratios, and your reserves matter too. Having cash in hand does not mean you qualify for the next loan.
Can a rate-and-term refinance fund a down payment?
Not directly. It allows only incidental cash back, capped at a small amount. Anything above that cap makes it a full cash-out.
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.
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
3. Fannie Mae Eligibility Matrix
4. CFPB: Using Home Equity Guide
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 Much Overtime Income a Cash-Out Refinance Lender Will Count · How Much Cash Comes Out of a Cash-Out Refinance With High Equity and Low Income? · How to Estimate Your New Balance and Payment After a Cash-Out Refinance
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.