The Quick Read: Often very little lands in your pocket, because much of the cash goes straight to the personal loan lender at closing. The cash you receive is the new loan amount minus your first mortgage payoff, your closing costs, and the personal loan payoff. The new loan is capped by the program’s loan-to-value limit on your home, not by the size of the personal loan. If that math comes out negative, the personal loan cannot be fully paid off without bringing cash or paying something down first.
What Is the Formula for Your Net Cash?
The formula has two steps. First, find the biggest new loan the program allows. Second, subtract everything that has to be paid before you see a dollar.
- Maximum new loan = the program’s LTV limit × the appraised value of your home.
- Cash to you = maximum new loan − first mortgage payoff − closing costs and prepaids you finance − personal loan payoff.
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.
LTV, or loan-to-value, is the new loan divided by what the home appraises for. On a conventional cash-out refinance on a one-unit primary residence, the limit is 80%. On two- to four-unit principal residences, second homes and investment property, it is 75%. Subject to lender guidelines and full file review.
Notice what is missing from that formula: the size of your personal loan. The personal loan does not raise or lower the ceiling. It only competes for the equity under the ceiling, and it sits in line behind your mortgage and your costs.
Think of it as a waterfall. Equity fills the first bucket (your mortgage), then the second (closing costs), then the third (the personal loan). Whatever is left over is yours, and depending on your equity it may be a little or nothing.
Why Does Replacing a Personal Loan Count as Cash-Out?
Because the debt is unsecured and not tied to the home, paying it off with mortgage proceeds is cash-out. A refinance of the limited cash-out kind is meant for swapping one mortgage for another. A personal loan does not fit.
Here is what a limited cash-out refinance can pay. Fannie Mae’s limited cash-out rules allow the new loan to pay off the first mortgage and closing costs, buy out a co-owner, and return a small amount of cash. A second lien can be paid off only if its proceeds paid for part of the home purchase or for permitted energy-related work. A personal loan is neither.
Freddie Mac’s allowable-uses list for no cash-out refinances works the same way. Anything beyond that list counts as cash-out. Freddie’s guide also treats paying off unsecured liens as cash-out in its renovation and construction sections. The broader rule follows: if the use is not on the allowable list, it is cash-out.
So the plain answer: replacing a personal loan generally means a full cash-out refinance, with cash-out leverage limits, cash-out pricing adjustments and cash-out seasoning rules.
How Much Cash Can You Take Without a Cash-Out Refinance?
Only a small amount. On a limited cash-out refinance, Fannie Mae lets cash back run to the lesser of 2% of the new loan amount or $2,000. Freddie Mac sets its own limit, the greater of 1% of the new loan amount or $2,000, so the agency matters when you quote the figure.
That is incidental cash, not debt-payoff money. Unless your personal loan balance is tiny, it will not fit under that cap. And paying it off with the proceeds would turn the loan into a cash-out anyway.
What Does a Net-Cash Walkthrough Look Like?
Run it with percentages instead of dollars. Say your home appraises at a value we will call 100. Your first mortgage balance is 50% of that value. Your personal loan payoff is 10%. Closing costs and prepaid items are about 3%.
You are on a one-unit primary residence. The cash-out limit is 80%, so the new loan can be up to 80% of value.
- New loan ceiling: 80%.
- Minus mortgage payoff: 50%.
- Minus closing costs and prepaids: 3%.
- Minus personal loan payoff: 10%.
- Left for you: 17% of the home’s value.
(Those inputs are modeled assumptions, not market figures.)
Now change one thing. Say your mortgage balance is 68% and everything else stays the same. The ceiling is 80%, minus 68%, minus 3%, minus 10%. You land at -1%. You are short. Either the personal loan is only partly paid, or you bring cash, or the deal does not work as designed.
| Scenario | What happens | Your cash at closing |
|---|---|---|
| Equity left after payoff | Personal loan fully paid, remainder to you | Positive |
| Equity about equal to payoff | Debt cleared, nothing back | Roughly zero |
| Equity falls short | Cannot pay it all without extra cash | Negative; you bring funds |
The takeaway: the ratio of your mortgage balance to your home’s value drives everything. A personal loan is rarely what stops this deal. A high existing mortgage balance usually is.
How Does the Personal Loan Actually Get Paid?
At closing, the title or settlement agent sends the money. Your first mortgage payoff goes to your current servicer. The personal loan payoff goes straight to the personal loan lender. Anything left comes to you.
You will want a current payoff statement from the personal loan lender, not just the balance on your last bill. The payoff figure includes interest accrued through the payoff date and sometimes a fee. Your Closing Disclosure should show the personal loan as a payoff line paid directly to that creditor.
Two practical points follow. The payoff amount can shift a little between the quote and the closing date, so a thin margin is a risk. And if you are counting on leftover cash for something else, plan on a smaller number than the napkin math suggests.
What Changes the Amount You Can Take?
Five things move the number.
1. Appraised value. A lower appraisal shrinks the ceiling. The appraisal sets value, and the 80% limit applies to that figure, not to what you paid or hoped for.
2. Occupancy and property type. Occupancy sets the leverage. A one-unit primary residence gets 80%; two- to four-unit homes, second homes and investment property get 75%. The Fannie Mae eligibility matrix shows lower cash-out leverage for manufactured housing as well.
3. Seasoning. The first mortgage being paid off generally must be at least 12 months old, counted note date to note date, and a borrower must have been on title for six months. Fannie Mae’s cash-out topic lists exceptions, including delayed financing for recent all-cash buyers. Delayed financing still gets cash-out leverage and pricing.
4. Credit and ratios. The wholesale conventional programs start at a 620 decision score, with a total debt-to-income ceiling of 50% on most automated findings. Manually underwritten loans use 36% or 45%, depending on reserves and score. Subject to lender guidelines.
5. Pricing adjustments. Fannie Mae applies loan-level price adjustments to certain cash-out transactions, based on LTV and credit score. This shows up in your cost, which affects what the new loan pays for. It is not a promise or a quote.
One more rule from Fannie Mae: on a loan with a debt-to-income ratio above 45% run through its automated system, six months of reserves are required. Reserves are money you hold after closing, in savings or other liquid assets.
Is There a Way to Skip the 80% Cap?
There is one lane. Across the wholesale programs Lendmire works with, a conforming, thirty-year fixed cash-out on a primary residence can reach 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio ceiling, and its own six months of seasoning. It is not written in Texas. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Not every file fits. It helps if you have a lot of equity and need a little more room than 80% gives you. Ask your broker whether your scenario qualifies, because the answer depends on the lender’s guidelines and a full file review.
In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution. That is a hard ceiling.
Can You Do This With an FHA or VA Loan?
Not with the streamline products. Both are built to refinance an existing government loan with minimal paperwork, not to pay off other debt.
The FHA Streamline refinances an existing FHA loan. HUD says cash in excess of $500 may not be taken out, and closing costs cannot be added to the new loan amount. It requires a net tangible benefit, meaning the refinance has to help you in a measurable way. The word “streamline” refers to the documentation, not to the costs.
The VA IRRRL (Interest Rate Reduction Refinance Loan) is a VA-to-VA refinance. VA’s IRRRL page describes it as allowing no cash back. Seasoning is the later of 210 days and six payments, and the funding fee is 0.5% unless you are exempt.
To pay off a personal loan with an FHA or VA mortgage, you need a different product, an FHA cash-out or a VA cash-out refinance. The VA version can refinance a non-VA loan and requires a net tangible benefit and cash-out disclosures. VA’s cash-out quick reference lays out the Type I and Type II structures. Leverage and fees on those loans vary by lender and program, so confirm them in a full file review.
What Does This Swap Do to Your Budget and Risk?
It can lower the monthly total, but it stretches the debt over a longer time. Personal loans usually run a few years. A mortgage runs up to thirty. A smaller payment spread over a much longer term can cost more in total interest, even when the monthly number looks better.
A cash-out refinance may extend the time it takes to pay off your mortgage, and your monthly payment may rise because the new loan is larger.
The bigger shift is security. Your personal loan is unsecured. After the refinance, that debt is attached to your home. Miss payments on an unsecured loan and you face collections and credit damage. Miss payments on a mortgage and you face foreclosure.
Cash-out also replaces your whole first mortgage. A home equity loan or HELOC leaves it in place. That matters if the loan you have now has terms you like. You could be giving up a good first mortgage to clear a smaller debt.
Your debt-to-income ratio also changes. The personal loan payment drops out once it is paid at closing, and a larger mortgage payment replaces the old one. Underwriters look at the new combined picture.
When Does It Fit, and When Does It Not?
It tends to fit when:
- You have meaningful equity after your first mortgage balance.
- The personal loan balance is large enough to justify closing costs.
- You can afford the new payment and plan to keep the home for the long haul.
- Your current first mortgage has no special terms worth protecting.
It tends not to fit when:
- The personal loan is small. Closing costs may outweigh the savings.
- Your mortgage balance is high enough that, once closing costs and the payoff are counted, the total would pass the loan-to-value limit for your property. That limit is 80% on a one-unit primary residence, and a wholesale lane for a conforming, thirty-year fixed cash-out on a primary residence can reach 89.99% LTV with no mortgage insurance at a 680 score.
- You would be swapping a short, nearly finished loan for thirty years of debt.
- You are likely to sell within a short time. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
| Option | First mortgage | Debt secured by home? | Best for |
|---|---|---|---|
| Cash-out refinance | Replaced | Yes | Large payoffs, enough equity |
| Home equity loan | Stays in place | Yes | Keeping a good first mortgage |
| HELOC | Stays in place | Yes | Flexible, ongoing needs |
| Keep the personal loan | Stays in place | No | Small balance, near payoff |
Some borrowers split the difference by leaving the first mortgage alone and adding a separate second lien instead. That is a possible alternate structure, and the combined LTV limits decide whether it works. Confirm them with your lender before counting on it.
Whether this fits can be a close call. A lower monthly total feels good now, and a longer term costs more later. Weigh both before deciding.
What Should You Check Before You Apply?
Pull together these items:
- A written payoff statement from the personal loan lender, with payoff instructions.
- Your current mortgage statement.
- Income and asset documents.
- Your best estimate of your home’s value, knowing the appraisal decides.
Then run the waterfall yourself with your own percentages. Estimate value, subtract your mortgage, subtract costs, subtract the payoff. If you land near zero or below, ask about alternatives before paying for an appraisal.
Compare the full terms of your current mortgage against the new one. A “no-cost” refinance generally means the costs are built into the interest rate or the balance. They have not disappeared.
Mortgage insurance matters too. On agency conventional loans, it is required above 80% LTV, except in the wholesale no-MI cash-out lane described above. The borrower may request cancellation at 80% of the original value, and the servicer must end it automatically at 78%. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is a program-sheet range, not a quote. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Key Terms Defined
Cash-out refinance: A new mortgage larger than your current one, where you receive or use the difference.
Limited cash-out (rate-and-term) refinance: A refinance that pays off your first mortgage and costs with only a small amount of cash back.
LTV (loan-to-value): The loan amount divided by the home’s appraised value.
Seasoning: The required time you must have owned the home or held the existing loan before refinancing.
Net tangible benefit: A measurable improvement to you from a refinance, required on FHA Streamline and VA IRRRL loans.
Payoff statement: A lender’s written figure for the exact amount needed to close out a loan on a given date.
Frequently Asked Questions
Will I get cash back if I replace a personal loan with a cash-out refinance?
Only if your equity exceeds the sum of your mortgage payoff, closing costs and personal loan payoff under the program’s LTV limit. When equity falls short of that sum, little or nothing is left over. The personal loan payoff goes directly to that lender at closing.
Can I use a rate-and-term refinance to pay off a personal loan?
Generally no. Rate-and-term, or limited cash-out, refinances are built to pay off your first mortgage, costs and certain purchase-money liens, with only incidental cash back. Paying off an unsecured personal loan falls outside that list and is treated as cash-out.
What if my personal loan is bigger than the cash available?
Then the refinance cannot pay it off in full as structured. You could bring cash to closing, pay part of the loan down beforehand, or look at alternatives such as a home equity loan or HELOC that leave your first mortgage alone. Each depends on lender guidelines and your file.
Can I roll closing costs into the new loan?
Often yes on a conventional cash-out refinance, because the costs can be financed into the new loan as long as the total stays under the program’s LTV limit. Every dollar of cost you roll in comes out of the cash left for you after the payoffs. The FHA Streamline is the exception, since HUD does not allow closing costs to be added to the new loan amount. Whether a given file can finance its costs is subject to lender guidelines and full file review.
Does paying off the personal loan help my debt-to-income ratio?
The answer depends on how the new payment compares with the old ones. Total ratio ceilings vary by program, and the automated finding governs most files.
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. Start with Lendmire’s cash-out refinance programs page. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
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 Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
2. Freddie Mac Guide §4301.4, No Cash-Out Refinance
4. Fannie Mae eligibility matrix
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
8. VA’s cash-out quick reference
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 Before the Appraisal?
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.