The Quick Read: It depends on your equity, not the bill: the cash you receive equals the new loan allowed by the program’s loan-to-value cap, minus the payoff of your existing mortgage, minus closing costs and any holdbacks, and the size of the medical bill changes none of those numbers. The loan-to-value (LTV) cap is the maximum loan as a share of appraised value. Your bank statements decide whether you qualify for the new payment. They do not decide how much cash you get.
- Primary residence: cash-out runs up to 80% LTV with a fixed expense ratio, or up to 75% with an accountant-prepared ratio.
- Second home: cash-out runs up to 75% LTV, depending on loan size and credit.
- Investment property: cash-out tops out around 75% LTV.
- The cap limits the new loan, not your cash. Your old mortgage payoff and closing costs come out first.
- A bill bigger than your net cash is not covered. A bill smaller than your net cash is covered. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
How Is the Cash Actually Calculated?
The cash is a subtraction problem. Appraised value times the maximum LTV gives the largest new loan. Take away the payoff of every lien on the property, then closing costs, then any required holdback. What is left lands in your account.
Four steps carry most of the weight:
1. Value. An appraisal sets the number. Your estimate and the tax assessment do not count.
2. The cap. The program applies its maximum LTV for your occupancy type, loan size and credit profile.
3. Payoff. Your current mortgage, any second lien, and any prepayment charge on the old loan come out of the new loan.
4. Costs and reserves. Closing costs reduce proceeds. Reserves, the liquid cushion a lender wants you to keep after closing, are usually a separate requirement. They typically run around 6 months of the housing payment on this type of file, and whether proceeds can count toward them varies by program.
A free-and-clear home still counts as cash-out. There is no payoff to subtract, but the whole new loan is equity pulled out of the property.
Equity is the first limit and income is the second. Plenty of equity does not help if the documented income cannot carry the larger payment. Strong income does not help if the cap leaves almost nothing after payoff.
A Worked Example in Percentages
Picture a self-employed owner with a primary residence. Run the numbers on these modeled assumptions, which are illustrations and not market data: the existing mortgage payoff equals 45% of appraised value, and closing costs and holdbacks equal 3% of value.
- Maximum new loan at the 80% cap: 80% of value.
- Minus payoff: 45% of value.
- Minus costs and holdbacks: 3% of value.
- Net cash: about 32% of value.
Now swap in the accountant-prepared route at 75%. The net cash falls to about 27% of value. The lower ceiling comes with the accountant-prepared ratio, so it is not a bonus. The fixed expense ratio carries the higher 80% cap.
A second home at 75% leaves the same 27% under the same assumptions. An investment property at 75% does too. The pattern holds: every point of LTV you do not have comes straight out of your cash.
One more detail matters for smaller needs. Loan sizes in this lane run roughly $125,000 to $3,500,000. If your equity is thin and the bill is modest, the net cash may land below what you need, or the new loan may fall under the program floor. A small bill and a small equity cushion do not always fit this tool.
What Is the Cash-Out Ceiling by Property Type?
The ceiling depends on occupancy first, then loan size and credit. This table shows typical ranges from select lenders in Lendmire’s wholesale network, subject to lender guidelines.
| Property and use | Typical cash-out ceiling |
|---|---|
| Primary residence, fixed expense ratio | Up to 80% LTV |
| Primary residence, accountant-prepared ratio | Up to 75% LTV |
| Second home | Up to 75% LTV, by loan size and credit |
| Investment property | Around 75% LTV |
If a quote ever shows a very high LTV on a bank statement loan cash-out, check the transaction type. The highest limits, up to 90% LTV on a primary residence, apply to a purchase or rate-and-term refinance, not to cash-out. Stronger files earn the top of that range.
An asset-depletion alternative, which qualifies you on savings rather than deposits, runs to about 80% LTV on a primary residence. It is worth asking about if your deposits are lumpy but your savings are deep.
How Do Bank Statements Replace Tax Returns?
Bank statements turn your actual deposits into qualifying income. The file is reviewed on documented income under the applicable program, subject to lender guidelines. Equity is collateral. It is never income.
Across Lendmire’s wholesale network, the standard package is 12 months of business or personal statements. One Scotsman Guide non-QM primer describes the same idea with 12 to 24 months of statements. It also gives a 50% expense factor as an example and notes that a profit-and-loss statement from a third-party tax professional can substitute. Treat that as a description of how the method works, not a quote for your file.
The underwriter scrubs the deposits:
- Transfers between your own accounts come out.
- Refunds, loan proceeds, gifts and one-time items come out.
- On business accounts, a lender-specific expense factor reduces the average.
- The remaining monthly figure is compared with the new payment and your other debts.
Expense factors differ from lender to lender, so no universal formula exists. A borrower who looks thin at one program can look fine at another. That is the practical case for comparing several lenders instead of applying to one.
If the property is a rental, a bank statement loan is one option and a DSCR loan is another.
Does the Lender Care That the Money Is for a Medical Bill?
It depends on occupancy. On an owner-occupied loan, personal use of the proceeds is generally fine. On a rental loan, it usually is not.
An owner-occupied file, meaning your primary residence or a second home, is a consumer mortgage. Paying a medical bill is an ordinary personal use, so the proceeds are generally unrestricted. The trade-off is the full set of consumer protections. The lender must make a reasonable, good-faith determination that you can repay, and it must verify income or assets with reasonably reliable third-party records. Disclosure rules for consumer mortgages apply too. A principal dwelling also carries a federal right to cancel in the period after signing.
A non-owner-occupied rental, including a short-term rental, works differently. Federal rules treat credit to acquire, improve, or maintain non-owner-occupied rental property as business purpose, and business-purpose loans are exempt from those consumer disclosure rules. Paying a personal medical bill is none of those three things.
Here is how that plays out in practice. Across Lendmire’s network, lenders generally keep proceeds on a rental loan tied to a business purpose. A signed business-purpose declaration is typical. So is a use-of-funds letter. Mixed-use draws are a flagged area. An investment label on the collateral does not turn a personal expense into a business one, because the purpose of the loan drives the classification and the collateral does not. This is general information and not legal advice.
Two edge cases come up often:
- LLC title. Holding the rental in an LLC means the borrower is not a natural person. That is a separate point, and by itself it does not make personal use of proceeds acceptable.
- A rental you own personally. The loan can still be business purpose. The same use-of-funds discipline applies.
So if the bill is personal and your home is your primary residence, the owner-occupied path is the cleaner fit. If your only equity sits in a rental, expect questions about where the money goes.
What If the Bill Is Bigger Than the Cash?
If the bill exceeds your net cash, the loan cannot close the gap, and borrowing the maximum does not change that. Your options sit around the loan instead.
| Situation | Practical move |
|---|---|
| Net cash covers the bill with room left | Borrow the structure that fits. A buffer is fine, idle cash is not. |
| Net cash covers about half | Negotiate the balance or set a payment plan for the rest. |
| Net cash is far below the bill | Skip the loan. Negotiate, seek assistance, or use a plan. |
| Equity is ample but income falls short | Ask whether an asset-depletion route fits. |
Note that the loan does not shrink to match the bill. Loans in this lane start around $125,000, so you take the net cash that the structure produces. If that exceeds the bill, the extra sits in your account and is yours to manage.
The first step before any application is to find the bill’s actual number. Ask the provider for an itemized statement and review it line by line. Ask whether a financial assistance program applies. Ask for a payment plan as well. Even a modest reduction can shift the bill from a loan-sized problem to a savings-sized one.
The Risk Side: Unsecured Debt Becomes Secured Debt
Medical debt is unsecured. Debt collectors cannot directly seize your home for unpaid medical bills. A cash-out loan changes that. Once you borrow against the house to pay the bill, the lender holds a lien. A default on the new loan can put the property at risk of foreclosure.
Secured debt is treated differently from unsecured debt if you ever file for bankruptcy. If your medical debt is large enough that bankruptcy is a possibility, speak with a qualified professional before you borrow against your home.
The loan also changes your monthly picture:
- A larger balance means a larger payment. Rental cash flow shrinks if the property is a rental.
- Reserves matter. Spending equity on a personal bill leaves less for your next acquisition or your next surprise.
- Cash with no plan is the weakest use. Borrowing a buffer on top of the bill adds to the balance you carry.
On rentals, remember the coverage point too. If you pursue a DSCR file, a larger loan means a larger payment and a lower coverage ratio. That ratio can limit the loan below the LTV cap. Programs below 1.00 coverage are available through select lenders in the network, but LTV and terms adjust.
CBS News reports that experts see scenarios where using home equity for medical bills makes sense, and scenarios where it does not. The cash-out wins when the bill is large, cheaper options are not available, and your income can carry the new balance with room to spare. It loses when negotiation could cut the bill or when the payment would stretch your budget.
Cheaper Moves to Check First
Borrowing against your home is usually a late step, not an early one. These come first:
| Option | Works best when | Trade-off |
|---|---|---|
| Itemized bill review | The balance looks high or unclear | Takes your time and persistence |
| Financial assistance application | Income is modest or the bill is large | Not every provider offers it |
| Payment plan | You can pay over time | Balance stays open |
| Home equity line of credit | You need flexible, partial draws | Usually needs standard income documentation |
| Bank statement cash-out | Self-employed, strong equity | Larger balance, lien on the property |
For self-employed borrowers, the bank statement route often matters because the tax returns show less income than the deposits do.
Common Misconceptions
The medical bill sets the cash amount. It does not. Equity, the LTV cap and your ability to carry the payment set it.
Seventy-five percent of value comes back to me. The cap applies to the new loan, not to your cash. Payoff and costs come out first.
Bank statement loans have no debt limit. No single federal debt-to-income cap applies to non-QM loans. Each lender sets its own. The old general 43% limit was replaced in a December 2020 federal rule with a price-based test for the QM category, which does not govern non-QM files.
Bank statement means easy. Deposits are scrubbed, and equity is collateral rather than income.
A medical bill can take my house. It cannot directly. A loan secured by the house can.
Key Terms Defined
Cash-out refinance: a new, larger mortgage that pays off the old one and hands you the difference in cash.
Payoff: the amount needed to clear every existing lien on the property.
Holdback: money the lender sets aside from proceeds for a required item, such as a repair or reserve.
Expense factor: the percentage a lender subtracts from business-account deposits to estimate what you actually keep.
Business-purpose loan: a loan taken primarily for a business or investment use, such as maintaining a rental, rather than a personal use.
Reserves: liquid funds a lender wants you to hold after closing, commonly around 6 months of the housing payment here.
Frequently Asked Questions
Can I borrow only the amount of my medical bill?
Not exactly. The loan is a full refinance, so its size is set by the cap, your payoff and the program’s loan-size floor, which starts around $125,000. You take the net cash the structure produces. If that is more than you need, you can set aside the extra or pay down other balances.
Does the lender need to know the money is for a medical bill?
On an owner-occupied loan, personal use is generally fine, so the purpose is not a hurdle. On a rental loan, lenders usually want the proceeds tied to a business purpose and may ask for a signed declaration and a use-of-funds letter. Ask the broker how the specific program treats it before you apply.
Do unpaid medical collections affect approval?
Collections show up in the credit review, and how a lender treats them varies by program. A lender may weigh them differently depending on credit profile, loan size and leverage. Ask about them before you apply so the file is matched to a program that fits.
Can I use a bank statement loan on my rental to pay a personal bill?
It is a risky plan. A bank statement loan on a non-owner-occupied rental is a business-purpose loan, and personal use of the proceeds can be restricted. If your equity sits in a rental and your need is personal, discuss it openly with the broker.
What if my home is free and clear?
It still counts as cash-out. With no payoff to subtract, the net cash is the new loan minus costs and holdbacks, within the same cap for your occupancy type. That also means a free-and-clear home puts the entire loan against the property, so weigh the lien carefully.
Run Your Numbers Before You Borrow
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 that matches your scenario to a program across a network of wholesale lenders, and its owner-occupied programs are available in 16 states. The best program for your situation depends on property type, credit, equity and documentation. You can reach the team at 828-256-2183.
For a broader look at how the pieces fit, read Lendmire’s complete DSCR loans guide. The net cash is whatever is left after payoff and costs, so figure that number first and size the decision around it.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging bank statement and other alternative-documentation mortgages — P&L-only, 1099-only and asset-based paths — 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. Scotsman Guide: Rev Up the Engine for Non-QM Lending
2. Cornell Legal Information Institute: 12 CFR 1026.43
3. CFPB: Regulation Z, Section 1026.3 (business-purpose exemption)
4. Yahoo Finance: Using a HELOC for medical expenses
5. CBS News, home equity to pay medical bills
6. CFPB: General QM final rule
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
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.