The Quick Read: It depends on which limit binds first, but the math is the same: the new loan, capped by a percentage of appraised value, minus your payoff, any prepayment penalty on the old note, and closing costs, so a loan in its last year usually leaves the most room. The payoff is small, so the equity limit rarely holds you back. Your deposits and the property type often set the real ceiling.
- Cash out equals the new loan amount minus the payoff statement minus closing costs.
- On owner-occupied files, the cash-out ceiling is up to 80% LTV on a primary residence and up to 75% on a second home, subject to lender guidelines.
- On an investment property, cash-out tops out around 75% LTV through select lenders.
- A prepayment penalty in its final year is usually a small percentage of a small balance.
- Your bank statement income can cap the loan before equity does.
“Your loan’s last year” can mean three things. It can be the final year of a prepayment penalty window, the final stretch before an interest-only period ends, or the final years before the balance is paid off. This article covers all three. The payoff stage changes the numbers more than most borrowers expect.
How Is the Cash Calculated?
Net cash is the new loan minus everything the closing table subtracts. A cash-out refinance replaces your existing mortgage with a larger one and pays you the difference. Corporate Finance Institute walks through that structure with a worked example.
Here is the sequence that matters:
1. Appraised value. The appraiser sets the value the lender uses. A cash-out file typically requires an appraisal.
2. Leverage cap. Multiply the value by the cash-out LTV cap for your occupancy type. This is the ceiling on the new loan.
3. Income limit. Your documented income must support the new, larger loan. The ceiling is whichever of the equity limit and the income limit is lower.
4. Payoff statement. Subtract what the old lender says you owe at closing. That includes accrued interest and any prepayment penalty, not just the principal balance.
5. Closing costs. Subtract origination charges, appraisal, title and prepaid items. Costs rolled into the loan still reduce your cash.
What is left is the check you receive. Always request the payoff letter before you run net-proceeds numbers. The balance on your last statement is not the same figure.
What Leverage Caps Apply to Cash-Out?
Cash-out ceilings run lower than purchase ceilings, and they differ by occupancy. Across select lenders in Lendmire’s wholesale network, the typical cash-out ranges look like this, subject to lender guidelines, loan size and credit:
| Property | Cash-out LTV ceiling | Notes |
|---|---|---|
| Primary residence | Up to 80% | Fixed expense ratio |
| Primary residence | Up to 75% | Accountant-prepared expense ratio |
| Second home | Up to 75% | Varies by loan size and credit |
| Investment property | Around 75% | Select lenders only |
Notice the accountant-prepared route sits at the lower ceiling. Many borrowers assume more paperwork earns more leverage. Here it does the opposite.
A cash-out file never gets the purchase ceiling. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Loan sizes on these programs generally run from about $125,000 to $3,500,000. Reserves commonly sit around six months of the housing payment.
Your Loan’s Last Year: What Changes?
A nearly paid-off loan changes the equity side of the formula dramatically and leaves the income side untouched. The payoff you subtract shrinks every year, so the gap between your leverage cap and your payoff widens.
Run the numbers on a primary residence with value indexed to 100 and a cash-out ceiling of 80% LTV. The ceiling is 80 points. These figures are before closing costs and any penalty. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
| Loan stage | Remaining payoff | Gross cash (points of value) |
|---|---|---|
| Early years | 80% of value | 0 |
| Mid-life | 50% of value | 30 |
| Late stage | 20% of value | 60 |
| Final stretch | 5% of value | 75 |
On an investment property at a 75% ceiling, subtract five points from each result. A late-stage payoff of 20% of value leaves gross cash of 55 points.
Those are gross figures. The equity side says a borrower in the final stretch could pull out three-quarters of the home’s value. The income side often says otherwise, which is the next section.
Equity Limit vs. Income Limit: Which Binds First?
On a late-stage loan, the equity limit rarely binds first, because the payoff is small. Whether income or equity sets your loan depends on your deposits and the property. A bank statement lender reviews your file on deposits, not on your equity. That is the whole point of the product.
A self-employed borrower supplies 12 months of personal or business statements. The lender averages the deposits and strips out transfers, loan proceeds, refunds and one-time deposits. It then applies an expense factor to estimate income. Scotsman Guide describes this approach, including a 12 to 24 month statement window and a 50% expense factor as an example. That article is dated, so treat the 50% as an illustration, not a current standard. Expense factors vary by lender, and a few lenders accept an accountant-prepared expense ratio instead.
Here is why that matters in a loan’s last year. A paid-down loan likely has a small monthly payment today. A cash-out can multiply that balance many times over. The new payment rises with it, and your documented income has to carry the larger obligation.
A quick decision list:
- Equity binds first when your income is strong relative to the property’s value. Your cash is set by the leverage cap minus the payoff.
- Income binds first when your deposits are modest, or a high expense factor trims qualifying income. The loan shrinks below the equity ceiling.
- Both are close when you borrow near the cap and income is thin. Expect the lender to size the loan down.
Bigger deposits lift the income ceiling. Larger loans also face tighter overlays on credit and reserves. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
The Prepayment Penalty in the Final Year
A refinance pays off the old note, so any prepayment penalty applies just as it would on a sale. The penalty is a contract term. It is not a program rule. Read your note.
Descending schedules are common on investor loans. One example is a 5/4/3/2/1 structure, where the penalty is a percentage of the outstanding balance and falls each year. In that structure, year five is the last penalty year at 1% of the balance. After the window ends, nothing is owed.
Two points work in your favor in a loan’s last year:
- The penalty usually applies to the balance at payoff, not the original loan amount. A small late-stage balance makes a small penalty.
- If the window ends soon, waiting may eliminate the fee. Weigh the fee against what waiting costs you.
Take the late-stage example above with a payoff of 20% of value and a 1% penalty. The fee is 0.2 points of value. Compared with 60 points of gross cash, that is a rounding error. Waiting a few months only makes sense if the window is about to expire and nothing urgent depends on the cash.
Some states limit prepayment penalties altogether, and consumer-purpose owner-occupied mortgages are generally more restricted than investor loans. A no-penalty note is also possible, in which case your payoff is balance plus accrued interest. The new loan may carry its own fresh penalty clock, so ask about its terms before you sign.
Interest-Only and Balloon Endings
An interest-only loan in its last year has barely paid down. The payoff is close to the original balance, so equity comes mostly from appreciation. The late-stage table above does not apply. A borrower in this spot has a different problem: the payment is about to reset, and a cash-out refinance can restructure the loan before it does.
A balloon maturity works the same way. The old loan comes due, and the refinance is the exit. Lenders still size the new loan on value and income, and they will not extend more because your deadline is close.
Term length on bank statement programs follows each lender’s program sheet. Do not assume a 40-year or interest-only structure is available. Those are mainly DSCR-side offerings.
Closing Costs and the Low-Appraisal Test
Costs come out of your cash, and a low appraisal hits it harder. Either way, you pay.
Use the same index. At 80% LTV with a payoff of 20 points, a full-value appraisal of 100 gives gross cash of 60 points. Now suppose the appraisal comes in 5% low, at 95. The ceiling drops to 76 points and gross cash falls to 56. That 5% miss on value costs you roughly 7% of your cash. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The lower the payoff, the more your cash depends on the appraisal. A borrower with a big balance has a small cash-out anyway, so the miss matters less in absolute terms. A borrower late in the loan carries the most exposure, because nearly all of the cash comes from equity that the appraised value sets. Gather comparable sales yourself before the appraiser visits.
Does the Occupancy Type Change the Process?
Yes. Occupancy decides which disclosure rules govern your file. An owner-occupied cash-out, whether a primary residence or second home, is a consumer mortgage. It carries the consumer disclosures, and the CFPB describes cash-out refinancing in these terms: it lets homeowners tap equity.
A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from those consumer disclosure rules. Know which one applies to your property before you compare quotes. Lendmire’s consumer mortgage licensing covers 16 states, so availability on owner-occupied files depends on where the property sits.
Alternatives When Your Loan Is Nearly Paid Off
Cash-out is not always the right tool for a late-stage loan. If you hold a low-cost note with a small balance, replacing it with a larger one raises your monthly obligation on the entire balance. Compare your options:
| Option | Touches your old loan? | Works best when |
|---|---|---|
| Bank statement cash-out | Yes, replaces it | Income is deposit-based and you need a large sum |
| Home equity line or second lien | No, sits behind it | You want to keep the old note and borrow less |
| DSCR cash-out on a rental | Yes, replaces it | The property’s rent covers the new obligation |
| Leave it alone | No | You don’t need the cash |
For a rental, the DSCR path reads the property’s rent against the full monthly obligation. It does not read your deposits. Lendmire’s complete DSCR loans guide explains how that works. Bank statement programs are not typically built for investment cash-out, though some write it. Which path fits depends on your documentation, your property, and how much you need.
If the property is one you bought recently, ask about waiting periods first.
Key Terms Defined
Payoff statement: the lender’s official figure for what you owe on a given day, including accrued interest and any penalty.
Prepayment penalty: a fee in your note for paying the loan off early, usually a percentage of the balance.
LTV (loan-to-value): the loan amount divided by the property’s appraised value.
Expense factor: the percentage of your deposits a lender assumes goes to business costs when estimating qualifying income.
Reserves: liquid funds, commonly around six months of the housing payment, that you hold after closing.
What to Prepare Before You Apply
Gather the following before you ask for terms:
- Twelve months of business or personal bank statements, with large one-time deposits explained.
- A current payoff letter, not a statement balance.
- Your note, to check for a prepayment clause and its schedule.
- Evidence of reserves, since most programs look for roughly six months.
- Any accountant-prepared expense statement, if you plan to offer one.
A broker that places files with several wholesale lenders can match your deposits, property and leverage need to the program that fits. Each lender sets its own overlays, so the right program depends on your situation.
Frequently Asked Questions
Can I get 90% LTV on a bank statement cash-out refinance?
No. Ninety percent is a purchase and rate-and-term ceiling on a primary residence. Cash-out on a primary residence tops out at up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio. A second home goes up to 75%, subject to lender guidelines.
Does a bigger payoff or a smaller payoff increase my cash?
A smaller payoff increases it. Cash before costs is the leverage cap times value, minus the payoff. A loan in its last year has the smallest payoff, so the equity room is largest. Your income still has to support the larger new loan.
Is a prepayment penalty owed on a refinance?
Usually yes, if your note has one and its window has not ended. The refinance pays off the old note, which triggers the clause. The penalty is typically a percentage of the outstanding balance at payoff. Many notes step the percentage down each year.
Can I use bank statement income on a rental property cash-out?
Possibly, but it is not the usual route. Programs that write investment cash-out exist and top out around 75% LTV. Many rental owners are better served by a DSCR loan, which looks at the property’s rent instead of your deposits. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
How many months of statements do I need?
Twelve months of business or personal statements is typical for the programs in Lendmire’s network. Lenders average the deposits, remove transfers and one-time items, and apply an expense factor. You qualify on documented income under the applicable program, subject to lender guidelines.
Where Your Numbers Land
If you are self-employed and want to see how the numbers work, Lendmire can help you compare bank statement loan options based on your deposits, the property, credit profile, leverage, and your goals. Lendmire is a mortgage broker, not a lender, and every file is underwritten individually. Approval and terms are not guaranteed.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving self-employed and high-net-worth borrowers in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages 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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References
1. Corporate Finance Institute: Cash-Out Refinance
2. Scotsman Guide: Rev Up the Engine for Non-QM Lending
3. CFPB
This article is part of Lendmire’s bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.