The Quick Read: The cash you receive is the new loan, minus the payoff of your old mortgage, minus closing costs and prepaids that come out of the proceeds. The new loan is capped at a percentage of your home’s appraised value. On a one-unit primary residence, the conventional cap is 80%, subject to lender guidelines and full file review. Costs you pay from your own pocket do not shrink the cash. Costs rolled into the loan do.
- The formula: net cash = new loan − existing mortgage payoff − other liens paid off − costs taken from proceeds.
- The cap: 80% of appraised value on a one-unit primary residence. Lower on other occupancies.
- The swing factor: whether you finance the costs or pay them in cash.
What Does “Pays Out” Actually Mean?
The payout is the check, or wire, you receive after everything else is settled. It is not the loan amount. It is not your equity. It is what is left.
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.
Freddie Mac defines a cash-out refinance as a mortgage with no specific restrictions on how you use the proceeds. That includes paying off a first lien, and it includes a new loan on a home you own free and clear. A home with no mortgage still counts as cash-out when you borrow against it.
Think of the new loan as a pot of money. The first claim on the pot is your old mortgage. Next come any other liens you are paying off. Then come closing costs and prepaids. Whatever remains is your cash. Lendmire’s cash-out refinance programs page lays out the program side. This article covers the math.
The Formula, Step by Step
Start with the ceiling. Take the appraised value and multiply by the leverage cap. For a one-unit primary residence, Fannie Mae’s Eligibility Matrix lists a maximum of 80%. Across the wholesale programs I arrange files through, the same 80% applies on a conventional cash-out for that occupancy. Two- to four-unit primary residences, second homes and investment properties are capped lower, at 75%.
Then work down:
1. Maximum new loan = appraised value × the cap.
2. Subtract the payoff of your existing first mortgage. Use the payoff quote, not the statement balance. The payoff includes interest accrued since your last payment.
3. Subtract any other liens you are clearing, such as a second mortgage or a home equity line.
4. Subtract closing costs and prepaids that are netted from proceeds.
5. What is left is your cash.
Here is a percentage-only picture. Say your home appraises at 100 units of value. The cap is 80%, so the new loan can reach 80 units. If your mortgage payoff is 50 units, you have 30 units before costs. Costs then come out of that 30. No dollars are needed to see the shape.
The appraisal matters more than most people expect. It is the denominator in the leverage test. A lower appraisal shrinks the ceiling, and the cash shrinks with it.
What Counts as Closing Costs and Prepaids?
Closing costs are the fees to create the new loan. The federal consumer-finance regulator’s research on cash-out refinances describes them as including origination fees, appraisal fees, title insurance and other taxes and fees.
The agencies do not cap closing costs. No official percentage range exists. Your Loan Estimate is the only number that matters for your file, so use it rather than a rule of thumb.
Costs fall into three buckets:
| Bucket | What it is | Effect on cash |
|---|---|---|
| Lender and third-party fees | Origination, appraisal, title, recording | Reduce cash if netted or financed |
| Prepaids | Interest to the first payment, homeowners insurance, tax setup | Reduce cash or add to cash to close |
| Escrow deposits | Starting reserve for taxes and insurance | Reduce cash or add to cash to close |
Prepaids and escrow deposits are not lender fees. They fund your own future bills. Many borrowers lump them in with “costs” and then wonder why the number looks bigger than expected.
Financed, Netted or Paid in Cash: Three Ways the Same Loan Pays Out
The same loan can put different amounts in your hands depending on how costs are handled. The CFPB’s guide to the Loan Estimate and Closing Disclosure explains that closing costs can be shown as financed from the loan amount or paid from other funds.
| Method | New loan size | Cash you receive | Cash you bring |
|---|---|---|---|
| Pay costs from your pocket | Stays at the cap or below | Higher | Some at closing |
| Deduct costs from proceeds | Same loan | Lower | None |
| Roll costs into the loan | Larger, up to the cap | Lower | None |
The cap still binds. If you are already at 80% of value, there is no room to roll anything in. The costs must then come out of proceeds or your pocket. Rolling costs in only helps when the loan sits below the cap.
Financed costs also carry forward. You pay interest on them for as long as you hold the loan. Costs paid in cash do not.
The Extra Pricing on Cash-Out Loans
Cash-out costs more than a plain refinance in how the loan is priced. Fannie Mae applies a loan-level price adjustment to certain cash-out loans, based on loan-to-value and credit score. Freddie Mac uses a cash-out credit fee, indexed to its Indicator Score and LTV.
The adjustment rises with higher leverage and lower credit scores. It usually reaches you through the pricing of the loan rather than as its own line item. I will not quote figures here. Your Loan Estimate shows the actual cost.
This is why a borrower at a modest leverage and a strong score often sees a cleaner outcome than one pushing to the cap. More cash raises the cost of every dollar.
When Do the Numbers Go Negative?
Sometimes the math turns against you. Suppose your payoff plus liens plus costs is larger than the new loan. Then there is no cash to give. You would bring money to closing instead.
That happens more often than people think. A low appraisal, a large payoff, a second lien and heavy prepaids can wipe out the cash. Before you apply, run the math with a conservative value. If the margin is thin, a small appraisal miss turns a payout into a bill.
A related case is the limited cash-out refinance, which Freddie Mac calls “no cash-out.” It pays off the existing first mortgage and closing costs, with only incidental cash back. Fannie Mae allows the lesser of 2% of the new loan or $2,000. If you need real cash, this is the wrong product.
Who Qualifies?
Several rules decide whether a payout is possible at all.
- Credit. The wholesale conventional programs I place files with start at a 620 decision score. A total ratio ceiling of 50% applies on automated findings, and manually underwritten loans use 36% or 45% with reserve and score factors from the Eligibility Matrix.
- Seasoning of the loan. The first mortgage being paid off must be at least 12 months old, counted note date to note date. Freddie Mac’s bulletin confirms the 12-month requirement and lists its exceptions.
- Seasoning on title. At least one borrower must have been on title for six months before the note date, with exceptions for delayed financing, inheritance and legal awards.
- Occupancy. Occupancy sets the leverage. A cash-out is written on a primary residence, a second home or an investment property, and the cap changes accordingly.
- Mortgage insurance. On the agency path, insurance is required above 80% LTV, except in the one wholesale no-MI lane covered below. The borrower may request cancellation at 80% of the original value, and the servicer must end it automatically at 78%. The program sheet I work from lists typical annual premiums of 0.58% to 1.86% of the balance. Cash-out at 80% or below normally needs none.
Texas works differently. A cash-out on a Texas homestead, a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. The wholesale 89.99% lane described below is not written there.
The Higher-Leverage Lane
One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance. It has its own six months of seasoning. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
More leverage means a bigger loan and a bigger check. It also means a smaller equity cushion. That trade is yours to weigh, and the file still goes through full review.
Where the General Rule Breaks
The formula holds up well, but several edge cases bend it.
Delayed financing. If you bought with cash, the six-month title wait can be waived. Fannie Mae’s exception requires an arm’s-length purchase and a settlement statement showing no mortgage financing was used. It still carries cash-out pricing.
PACE loans. Fannie Mae’s guide treats a borrower who refinances the first mortgage but leaves a PACE obligation unpaid as ineligible for cash-out. Freddie Mac requires a first-lien PACE obligation to be paid in full from proceeds. Confirm against the current guide.
Renovation and energy products. Freddie Mac treats certain renovation and energy-improvement loans as “no cash-out” when proceeds fund only eligible work.
Manufactured homes. Fannie Mae limits single-width manufactured homes to purchase and limited cash-out transactions.
Student-loan cash-out. Fannie Mae waives its cash-out price adjustment when specific requirements are met. The standard leverage caps still apply.
Buying out a co-owner. Under a written agreement, this is a limited cash-out at both agencies.
When the Cash Actually Arrives
You do not get paid at the table. On a refinance of your principal residence, you have three business days to cancel. Funds are generally held until that window ends.
Two documents show you the real number. The Loan Estimate gives estimated closing costs and cash to close. The Closing Disclosure gives the final version. The CFPB tells borrowers to compare the two and ask the lender to explain any significant change. Look at the cash-to-close line first. If cash is payable to you, it shows there.
Key Terms Defined
Cash-out refinance: a new mortgage larger than the debts it pays off, with the difference paid to you.
Net cash: the money you actually receive after the payoff, other liens and costs.
Prepaids: amounts paid at closing for future costs, such as interest, insurance and tax setup.
Payoff quote: the exact amount needed to retire your current mortgage on a given date, including accrued interest.
LTV: the new loan divided by the appraised value.
Limited cash-out: a refinance that pays off the old loan and costs, with only small cash back.
Is It Worth It?
A cash-out replaces your current mortgage entirely. That is the part many people overlook. You are not borrowing a little extra. You are swapping the whole loan for a new one. If your current loan has favorable terms, you give those up.
A cash-out also draws down wealth you could use later. Those are real costs, so weigh them before you borrow.
Compare costs to need. A large, one-time use that pays for itself can justify the costs. A small amount, once you subtract everything, may not. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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
Do closing costs come out of my cash-out check?
Only if you choose that route. You can pay them from your own funds, deduct them from proceeds, or roll them into the loan if you are below the cap. Deducting or rolling them in both reduce your cash.
Can I borrow 100% of my equity?
No. The cap limits the new loan, not your equity. On a one-unit primary residence it is 80% of appraised value for the standard conventional path, subject to lender guidelines.
Why does my payoff differ from my statement balance?
The payoff includes interest accrued since your last payment and any fees owed. Ask your servicer for a payoff quote tied to your expected closing date.
Can the payout be zero or negative?
Yes. If the payoff, other liens and costs exceed the new loan, you bring cash instead. A low appraisal is the usual cause.
Is a cash-out refinance the same as a home equity loan?
No. A cash-out replaces your first mortgage with one new loan. A home equity loan or line sits behind your existing mortgage as a second lien.
For your own numbers, request a scenario review with Lendmire.
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.
For the program’s current guidelines, see conventional loan programs.
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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
2. Fannie Mae Eligibility Matrix
3. CFPB research on cash-out refinances
4. CFPB Guide to Loan Estimate and Closing Disclosure forms
5. Fannie Mae Selling Guide B2-1.3-03 Cash-Out Refinance Transactions
6. Freddie Mac Bulletin (Sept 6, 2023)
7. CFPB Ask CFPB, waiving rescission
8. CFPB Closing Disclosure explainer
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 a Conventional Cash-Out Refinance Lends Inside Seasoning · How to Borrow Again With a Conventional Cash-Out Refinance · How Reserves Are Verified on a Conventional 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.