The Quick Read: Your net is the new loan, minus the payoff of your old mortgage, minus any closing costs paid from the loan. The new loan is capped at a percentage of the appraised value. On a conventional one-unit primary home, that cap is 80%, subject to lender guidelines and full file review; the cap is lower for other property types. So on a $500K home that appraises at $500K, the loan ceiling is 80% of the value, and everything you owe comes out of that ceiling first.
The Formula in One Line
Net cash = new loan − existing mortgage payoff − costs taken from the loan.
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.
That is the whole thing. Three numbers decide it:
- The appraised value. Not your purchase price and not your own estimate.
- The cap. The maximum loan-to-value ratio (LTV) your program allows.
- What you owe. Your first mortgage, plus any HELOC or second lien the new loan has to retire.
Most people stop at “80% of $500K” and call that their cash. It isn’t. That figure is the size of the new loan, not the check. Your old mortgage has to be paid off from it before you see anything.
Key Terms Defined
Net cash: the money that actually reaches you after payoffs and costs are subtracted from the new loan.
Gross cash-out: the new loan minus your payoff, before closing costs come out.
Payoff: the exact balance, including interest owed, needed to close out your existing mortgage and any other lien being retired.
Prepaids: items paid at closing for the future, such as the first stretch of interest and funds set aside for taxes and insurance. They reduce your check or add to your cash due.
LTV (loan-to-value): the new loan divided by the appraised value. An 80% LTV means the loan equals 80% of what the home appraises for. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Why “Equity” Is Not the Same as “Cash”
Equity is value minus what you owe. Cash is only the part of equity the lender lets you borrow against.
Say you own a home with no mortgage, so your equity is 100% of value. A conventional cash-out on a one-unit primary home stops at 80% LTV. The other 20% stays in the home as a cushion. Lendmire’s cash-out refinance programs page lays out how that leverage changes by occupancy and loan type. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Occupancy matters because the cap moves with it. Across the wholesale programs Lendmire places files with, a conventional cash-out reaches 80% on a one-unit principal residence. It drops to 75% on two- to four-unit principal residences, second homes and investment property. The Fannie Mae Eligibility Matrix lists maximum LTVs by transaction type and number of units. If you plan to compare programs, start there.
A free-and-clear home still counts as cash-out. Freddie Mac’s Guide §4301.5 treats a new loan on a home with no mortgage as a cash-out transaction, with its own seasoning rules.
The Step-by-Step Walk From Value to Check
Here is how a lender builds the number, in order.
1. Appraisal sets the value. The home is appraised, and that figure drives the cap.
2. Apply the cap. Multiply the appraised value by the program’s maximum LTV. That is the ceiling on the new loan, including any costs you finance.
3. Subtract the payoff. Take out the first mortgage balance and any other lien the loan must retire.
4. Subtract costs from the loan. Closing costs financed into the loan come out of the ceiling. Costs you pay separately raise your cash due at closing instead.
5. The remainder is your net.
Keep one point straight: financing a cost does not make it free. It raises the loan balance, so you owe interest on it for as long as you hold the loan. The cash is smaller, and the balance is larger than it looks.
The $500K Scenarios, Shown as Percentages
Every figure below is a modeled illustration, not a quote and not a commitment to lend. Payoff balances are shown as a percentage of the appraised value so you can scale them to your own home. On a $500K appraisal, each point of value is 1% of that figure, and you can do the multiplication yourself.
| Payoff (% of value) | Gross cash at 80% LTV | Gross cash at 75% LTV |
|---|---|---|
| 30% | 50% of value | 45% of value |
| 50% | 30% of value | 25% of value |
| 65% | 15% of value | 10% of value |
The 80% column fits a conventional one-unit primary home. The 75% column fits a two- to four-unit primary home or a second home.
Closing costs come off those gross numbers. Their size depends on the loan, the lender’s terms and your location, so they appear on your Loan Estimate rather than in a table here. Treat the net as “gross minus costs.” A homeowner with a 65% payoff at 80% LTV has only 15 points of value as gross cash. Even modest costs take a visible bite out of that. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
When the appraisal comes in low
Take the middle row: 50% payoff, 80% cap. Now suppose the home appraises 5% below your expectation. The value is 95% of what you planned on. The loan ceiling becomes 80% of that, or 76% of your expected value. Subtract the same 50% payoff and gross cash falls from 30% of expected value to 26%.
The payoff did not move. Only the ceiling did, so the whole loss lands in your cash. A low appraisal hurts because the cap multiplies the gap.
Working backward from the check you want
Flip the formula. Add the payoff, the costs and the cash you want. That sum is the loan you need. Then divide by the appraised value to see the LTV that loan requires.
If that LTV is above the program’s cap, the deal does not reach. Your options are a smaller check, a different program, or waiting. This takes a minute with a pencil and saves you from applying for a loan the cap rules out.
What Shrinks Your Check
Five things take cash from the number you first calculated.
- A lower appraisal. Shown above.
- Second liens and HELOCs. If the new loan retires them, their balances come off the ceiling just like your first mortgage.
- Financed closing costs. They use up loan capacity.
- Prepaids and escrow set-asides. Taxes, insurance and interest paid at closing reduce proceeds or raise cash due.
- A lower cap than you assumed. A second home, a small multi-unit building, or a jumbo balance can sit under a tighter limit.
On a Loan Estimate or Closing Disclosure, look for the line that separates total closing costs from the costs paid out of your loan amount. That line shows how much of your “cash” the costs have already absorbed.
Where the Rule Bends
The 80% cap is the general rule on a conventional primary home. Several situations change it.
The no-mortgage-insurance lane. Mortgage insurance normally applies above 80% LTV on the agency path. One exception is a wholesale cash-out lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 credit score, a 50% total ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. On the 50%-payoff scenario above, that lane puts gross cash near 40% of value (89.99% less the 50% payoff) instead of 30%. It is not offered in Texas.
Texas homesteads. A cash-out on a Texas homestead, known as a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution, whatever a program might otherwise allow.
Two seasoning clocks. Lenders check two different timers. At least one borrower must have been on title for six months. The first mortgage being paid off must also be at least 12 months old, counted from its note date to the new note date. Freddie Mac’s §4301.5 lists the exceptions. That text is dated, so confirm the current rule before relying on it.
FHA cash-out. HUD’s Handbook 4000.1 sets the maximum LTV and CLTV on FHA cash-out refinances at 80%, per HUD’s published update. FHA cash-out is for owner-occupied principal residences.
VA cash-out. A VA cash-out is a full-appraisal new VA loan that can pay off a non-VA mortgage and put cash in your hands. Lender overlays often set a lower ceiling than the VA’s own, so ask what the lender’s cap is.
The Refinances That Do Not Net Cash
Some refinances look like cash-out options. They are not.
- Rate-and-term (limited cash-out). Across the wholesale programs Lendmire places files with, this reaches 95% LTV on a one-unit primary home. The new loan pays off the first mortgage, the closing costs and a purchase-money second lien, with only incidental cash back. Fannie Mae sets that cash at the lesser of 2% of the new loan amount or $2,000, and Freddie Mac sets it at the greater of 1% of the new loan amount or $2,000. A tuition or remodeling bill larger than that incidental amount turns the file into a full cash-out.
- FHA Streamline. For an existing FHA loan, with no appraisal, limited credit review and a net tangible benefit. HUD’s Streamline page says cash taken out is limited to $500, and closing costs may not be rolled in.
- VA IRRRL. For an existing VA loan, with a 0.5% funding fee unless exempt and no VA appraisal. It puts no cash in your hands. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
If cash is your goal, these are the wrong tools. If a lower payment or shorter term is the goal, they can be the right ones.
Does a Cash-Out Lower Your Payment?
Not necessarily. A larger loan replaces your current one, so the payment can rise and the payoff date can move out. The CFPB’s guide to using home equity says so directly. It adds that lenders typically want you to keep 10% to 20% of the home’s value as equity.
Your existing loan’s rate and term are also gone once you refinance. If you hold a mortgage you like, a separate second loan such as a HELOC or home equity loan can reach cash without replacing it. Those have their own costs, and depending on the terms, a cash-out can cost more or less.
Run both paths with real quotes. The “right” answer depends on the loan you hold now, how much cash you need and how long you will keep the home.
What Lenders Check Before the Number Is Final
Across the wholesale conventional programs Lendmire works with, the starting credit point is a 620 decision score. The automated underwriting finding governs most files, with a total debt ratio ceiling of 50%. Manually underwritten loans use tighter ratios and bring in reserves and score factors.
A recent bankruptcy, foreclosure or short sale adds a waiting period set by the agencies. Four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu are the standard periods. Shorter ones may apply with documented extenuating circumstances.
Credit and ratios decide whether you qualify. Value and payoff decide how much you net. Both are subject to lender guidelines and full file review.
Frequently Asked Questions
Is the cash I net the same as 80% of my home’s value?
No. Eighty percent of value is the maximum new loan on a conventional one-unit primary home, not your cash. Your mortgage payoff and any financed costs come out first. Only what is left is yours.
Do closing costs come out of my cash-out?
Yes, they can. If you finance them, they sit inside the loan and reduce the cash you receive. If you pay them separately, your cash due at closing rises. Either way, your Loan Estimate and Closing Disclosure show how the costs were handled.
Can I take cash out of a home I own free and clear?
Yes, subject to guidelines. A new loan on a home with no mortgage is still classified as cash-out, so the same cap and seasoning checks apply. Freddie Mac’s guide addresses this case and the six-month title rule.
What if my appraisal comes in lower than I expected?
Your loan ceiling shrinks, while your payoff stays the same. Each point the value falls cuts the ceiling by the cap percentage, and your net drops by that amount. Run the formula again with the appraised number before deciding whether the loan still makes sense.
Is a rate-and-term refinance a way to get cash?
Not in any meaningful amount. Fannie Mae and Freddie Mac allow only incidental cash back on those loans, and an FHA Streamline limits cash to $500. A VA IRRRL provides none.
Weighing It
Before you apply, write down your payoff, the appraisal you expect and the cap for your occupancy. Then subtract a cushion for costs and prepaids. That gives you a realistic net, and often a smaller one than the headline suggests.
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.
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. Fannie Mae Eligibility Matrix
2. Freddie Mac Seller/Servicer Guide §4301.5
4. HUD FHA Streamline Refinance
5. CFPB guide to using home equity
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 Cash Comes Out of a Cash-Out Refinance When the 30-Year Clock Restarts? · How Much a Cash-Out Refinance Gives an S-Corp Owner · 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
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.