The Quick Read: There is no special “new house” product. You take an ordinary cash-out refinance on the home you own and use the cash as your next down payment. Freddie Mac places no restriction on how cash-out proceeds are used. The harder part is sequencing: the new lender will count your larger payment on the old home against you.
What Is a Cash-Out Refinance, Really?
A cash-out refinance replaces your current mortgage with a bigger one. The new loan pays off the old balance, and you keep the difference as cash. Equity is the gap between what the home is worth and what you owe. That equity is what you borrow against.
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.
Lenders do not label the cash by purpose. Whether it covers a down payment, a roof, or credit cards is your call. Freddie Mac’s guide says so directly. A VA-backed version works the same way, and VA notes it comes through a private bank, mortgage company, or credit union, never from VA itself.
So “which banks offer it” is really a question about which programs fit you. Fannie Mae and Freddie Mac write the conventional rules. HUD writes the FHA rules, and VA writes its own. Individual lenders can add stricter overlays on top.
How Does a Broker Fit Into the Picture?
Lendmire is a mortgage broker, not a lender. One lender may set a higher credit floor, another may handle a certain property type better. That is why the best program for your situation depends on your equity, credit, and timeline.
A broker shops several wholesale lenders and matches your file to the one whose guidelines fit. You can see how this works on Lendmire’s cash-out refinance programs page. Lendmire is licensed for consumer lending in 16 states, and every program is subject to lender guidelines and full file review.
How Is the Loan Underwritten, Step by Step?
Here is the sequence a typical file follows.
1. Equity and eligibility check. The lender confirms you have enough equity and that your clocks have run. The first mortgage being paid off must be at least 12 months old, note date to note date, and you must have been on title for six months. Exceptions exist for delayed financing, inheritance, and legal awards.
2. Pick the loan type. Conventional, FHA, or VA cash-out. Streamlines do not return real cash.
3. Underwriting. The lender reviews credit, income, debt-to-income ratio (DTI), and reserves. Reserves are cash left over after closing. Your new, larger payment on the old home is the one being tested.
4. Appraisal. The appraised value sets your maximum loan. It can also sink a plan built on a guessed number.
5. Closing and cancellation window. On a home you live in, you typically get three business days to cancel after signing, which delays when funds are available. CFPB explains the rule on its right of rescission page. Cancelling does not erase your old loan, and you still owe it.
6. Move the cash to the new purchase. The next lender must verify where your down payment came from. Keep the refinance closing statement and the deposit record together.
What Leverage Does a Conventional Cash-Out Allow?
A conventional cash-out refinance reaches 80% loan-to-value (LTV) on a one-unit principal residence. LTV is the loan amount divided by the home’s value. Two- to four-unit principal residences, second homes, and investment properties top out at 75%. Occupancy sets the leverage.
Lenders also want the first mortgage being paid off to be at least 12 months old, with you on title for six months. Typical wholesale conventional programs start at a 620 decision score, though the automated finding governs most files, with a total ratio ceiling of 50%. These are guidelines, not promises.
There is one wholesale lane that breaks the usual pattern. It reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed, primary residence, conforming balance. It carries 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.
In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution. State rules can add limits elsewhere too.
Which Loan Types Can Fund a Purchase?
Only some refinances return meaningful cash. This table sorts them.
| Loan type | Can it fund a down payment? |
|---|---|
| Conventional cash-out | Yes, within LTV limits |
| Conventional rate-and-term (limited cash-out) | No, incidental cash only |
| FHA cash-out (appraisal-based) | Yes, subject to FHA rules |
| FHA Streamline | No, cash capped at $500 |
| VA Type II cash-out | Yes, for a home you live in |
| VA IRRRL | No, existing VA loans only |
Limited cash-out is the trap. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000 back at closing. Freddie Mac allows the greater of 1% of the new loan amount or $2,000. Either way, that covers incidentals, not a down payment.
HUD says cash above $500 cannot come out of an FHA Streamline. It also says “streamline” describes the paperwork, not the cost.
Where Does the General Rule Break?
Cash-out refinances have edge cases, and a few matter for this plan.
Cash buyers. If you paid cash for Home A, delayed financing lets you skip the title wait. It is still priced and capped as cash-out. If you funded the purchase with other borrowing, the proceeds must pay that borrowing down first.
Free-and-clear homes. A home owned outright can still take a cash-out loan. The same borrowed-funds rule applies if you borrowed to buy it.
Reserves. Fannie Mae does not count cash-out proceeds from the subject property as reserves. Cash-out money can be your down payment, but ask the next lender how it treats those funds. Reserve requirements also rise when you own several financed properties.
Keeping Home A as a rental. The three-day cancellation right attaches to your principal dwelling, per Regulation Z. A second home carries no such right. Do the cash-out while Home A is truly your residence, and answer every occupancy question honestly.
VA borrowers. VA cash-out is for a home you live in. It cannot pull cash from a pure rental.
Jumbo balances. Above the conforming limit, jumbo lanes take over, with a 660 decision score and leverage to 90% under that program.
What Will the Next Lender Do With Your Old Home?
This is the step people miss. Home B’s lender counts Home A’s new payment in your DTI. If Home A is pending sale, the lender uses current and proposed housing payments unless you document the sale, such as an executed sales contract.
If you keep Home A, standard rental income and reserve rules apply. Fannie Mae dropped its special conversion requirements for former primary residences years ago.
Picture a homeowner with a loan at 60% of the home’s value. They cash out to 80% LTV, then apply for Home B. Their Home A payment just jumped, and Home B adds a second payment. Both land in the DTI. The cash-out that made the down payment possible can also be what trips the next approval. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Run it the other way. A borrower plans to sell Home A within the year. A signed sales contract may let the next lender drop the Home A payment, but only with documentation. Ask before you commit to either route.
What Does Your Decision Look Like in Practice?
Decide in this order: equity first, then clocks, then DTI after both payments, then paperwork.
- Is there enough equity at 80% LTV, or 75% for multi-unit homes, to cover the down payment you want?
- Has your current loan passed 12 months, and have you been on title six months?
- Does your DTI hold with two housing payments?
- Can you document the cash trail from refinance to purchase?
- Does the three-day cancellation window fit before your purchase contract closes? The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Mortgage insurance is the other cost lever. It is typically required above 80% LTV, except in the wholesale no-MI cash-out lane described earlier. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance, which is the sheet’s range, not a quote. You can request cancellation at 80% of original value with good payment history, and the servicer must end it at 78% under the Homeowners Protection Act.
Cash-out loans also typically cost more than no-cash-out refinances, since cash-out carries pricing adjustments. CFPB research found many cash-out borrowers use the money to pay down other debt. A lender may therefore ask questions when the stated purpose is funding a new home, so have your plan documented.
Alternatives exist. A HELOC or home equity loan on Home A leaves your first mortgage untouched. A lender will want the source of those funds documented in either case. Whether that beats a cash-out depends on how you feel about your existing first mortgage.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off the old one and hands you the difference in cash.
Seasoning: The waiting period a lender requires before you can refinance, such as a 12-month-old first mortgage.
Debt-to-income ratio (DTI): Your monthly debt payments divided by your monthly gross income.
Delayed financing: An exception that lets a recent cash buyer take a cash-out loan without the usual title wait.
Right of rescission: Your window to cancel certain refinances on your principal home within three business days.
Frequently Asked Questions
Can I use cash-out refinance money as a down payment on another house?
Yes. No agency rule restricts what you do with the proceeds. The next lender will verify the source of funds and count both mortgage payments in your DTI. Documentation matters, so keep the closing statement and deposit record together.
How long must I own my home before I can cash out?
Freddie Mac wants the loan being paid off to be at least 12 months old, and you should be on title for six months. Wholesale lanes can add their own seasoning, so program rules vary.
Can an FHA Streamline or VA IRRRL fund a new house?
No. The FHA Streamline caps cash at $500, and the VA IRRRL only refinances an existing VA loan. A conventional cash-out, FHA cash-out, or VA Type II cash-out can return real cash.
Does the cash count as my reserves on the new house?
Often not. The money can still serve as your down payment, but confirm the treatment with the next lender.
Can I cancel a cash-out refinance after signing?
On your principal home, usually within three business days. Saturdays count, Sundays and legal holidays do not. Cancelling does not cancel your old loan, so you still owe it.
Should You Cash Out or Keep Your Current Loan?
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. Every program is 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.
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
5. Regulation Z
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 to Pay Out an Ex Without Selling Using a Cash-Out Refinance · Banks That Offer a Cash-Out Refinance to Pay for Home Repairs · How to Run the New Payment on a Cash-Out Refinance Before Signing
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.