The Quick Read: A lender decides eligibility by testing five things in order: the loan type, how long you have owned the home and held the current loan, your credit and income, the appraised value against the leverage cap, and what is left after payoffs and costs. Most files turn on the leverage cap and the seasoning clock. Everything below is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Key Takeaways
- A cash-out refinance replaces your mortgage with a larger one and pays you the difference.
- Conventional cash-out on a one-unit primary residence is typically written to 80% of appraised value.
- The loan you are paying off usually must be at least 12 months old, and a borrower must have been on title for 6 months.
- The cash you receive is smaller than your paper equity, because the payoff and costs come out first.
- Two lenders can reach different answers on the same file, because lenders add their own rules on top of agency rules.
What a Cash-Out Refinance Is
A cash-out refinance is a larger mortgage that pays off the current one and hands you the rest as cash. The Consumer Financial Protection Bureau describes it the same way, and it notes the new loan may run longer and the monthly payment may go up because a larger loan replaces the old one.
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.
A rate-and-term refinance is the other path. It pays off the existing first mortgage and closing costs, with only small incidental cash back. Across the wholesale programs Lendmire places files with, the line between the two is the first thing a lender settles, because it sets which leverage cap and which seasoning rules apply. Lendmire’s cash-out refinance programs page lays out the program families.
How the Lender Reads Your File, Step by Step
Underwriting follows a sequence. Knowing it tells you which problem to fix first.
1. Classification. The lender decides whether the loan is limited cash-out (rate-and-term) or cash-out. Under Fannie Mae’s rules, a limited cash-out loan allows cash back of only the lesser of 2% of the new loan or $2,000. Take more than that, or pay off debts other than the first mortgage, and the loan is cash-out.
2. Eligibility screen. The lender checks occupancy, property type, and how long you have owned the home and held the current loan.
3. Credit and income underwriting. The lender verifies income, debts, assets and credit, and runs the file through automated underwriting.
4. Appraisal and value. The appraised value is the denominator for leverage. A lower appraisal shrinks the maximum loan.
5. Maximum loan and net cash. The lender multiplies value by the leverage cap, then subtracts the payoff, any liens paid off, and financed costs. What remains is your cash.
6. Title and conditions. The new loan must sit in first lien position. Any remaining liens must be clearly subordinate.
A missing document at any step stalls the steps after it. Documents on a typical checklist: ID, pay stubs, traditional personal-income documentation, asset statements, the current mortgage statement, homeowners insurance, and property tax information. Lender checklists vary.
How Much Equity Do You Have to Keep?
Leverage caps decide it. On conventional loans, across the wholesale programs we place, a cash-out on a one-unit primary residence is written to 80% of value. Two- to four-unit primary residences, second homes and investment property are written to 75%. Occupancy sets the leverage, and every figure remains subject to lender guidelines and full file review.
One wholesale lane goes higher, reaching 89.99% with no mortgage insurance. It needs a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. That lane is the one exception to the usual mortgage insurance rule, which otherwise applies above 80%.
In Texas, a cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution. The wholesale no-MI lane is not written there.
Here is how the net cash works. The lender starts with the leverage cap applied to the appraised value. From that ceiling it subtracts your current payoff, subtracts any lien it pays off, and subtracts financed costs. Your cash is what is left. Equity on paper and cash in hand are different numbers.
Seasoning: How Long You Must Own
Seasoning is time-based. For a conventional cash-out, Fannie Mae’s cash-out guide says an existing first mortgage that is paid off must be at least 12 months old, measured from the existing note date to the new note date. A borrower must also have been on title for 6 months, with exceptions for delayed financing, inheritance and legal awards.
Appreciation does not shorten the clock. A home that gained value in six months still waits. Files that assume otherwise get kicked back.
Credit, Income and Ratios
The wholesale conventional programs we work with start at a 620 decision score, or 640 on an adjustable rate under manual underwriting. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, with reserve and score factors from the Eligibility Matrix.
The total ratio compares your monthly debts, including the new payment, to your gross monthly income. Lenders must also make a good-faith, documented determination that you can repay. The CFPB’s ability-to-repay rule requires verified information. That is why undocumented income gets no credit.
Credit events carry agency waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them. Some lenders set higher score floors than the program minimum. That is an overlay, not an agency rule.
Mortgage Insurance on Cash-Out
On the agency path, mortgage insurance is required above 80% leverage, except in the wholesale no-MI lane described above. Because conventional cash-out tops out at 80% on a primary residence, most files do not carry it. Where it does apply, you can request cancellation at 80% of original value with good payment history and no subordinate liens. The servicer must end it automatically at 78% under the Homeowners Protection Act. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance, as a program sheet figure and not a quote.
Where the General Rule Breaks
Edge cases are where files go sideways.
Buying out a co-owner. Freddie Mac’s special-purpose cash-out section requires that the borrower and co-owner jointly owned the property for at least 12 months, with evidence of primary-residence occupancy and a signed written agreement. The borrower who keeps ownership may not receive proceeds. At both agencies, a co-owner buyout under a written agreement is a limited cash-out transaction.
Paying off a second lien or HELOC. Only a second lien used to buy the property, or to fund construction, keeps the loan in the limited category. A second lien used for other spending makes it cash-out.
Student-loan payoff. Fannie Mae allows student loans to be paid through the refinance with a waiver of the cash-out pricing adjustment when its requirements are met. Standard cash-out leverage limits still apply.
High-LTV refinance. Fannie Mae’s high-LTV refinance is paused for acquisition, so it is not an option to plan around.
Government streamlines. The FHA Streamline and the VA IRRRL are rate-and-term products for existing FHA and VA loans. They return no cash. An FHA Streamline carries no appraisal, a limited credit review and a net tangible benefit test. A VA IRRRL carries a 0.5% funding fee unless exempt, no VA appraisal, a net tangible benefit test, and seasoning of the later of 210 days and 6 payments.
FHA and VA cash-out. VA says a VA cash-out requires a Certificate of Eligibility and that you will live in the home. It also lets you refinance a non-VA loan into a VA-backed one. You get the loan through a private lender, not from VA. A common myth says VA caps cash-out at 90%. Federal rules set a 100% ceiling, and the 90% figure is one of several net tangible benefit criteria. A lender may still set its own lower cap. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Jumbo. Above the conforming limit, jumbo lanes take over: a 660 decision score, leverage to 90%, loans to $5,000,000 and a 50% ratio ceiling on the fixed lanes.
Why Two Lenders Reach Different Answers
Agency rules set the floor. Lenders then add overlays: a higher score, a lower leverage cap, extra reserves. The same file can clear at one wholesale lender and stall at another. A broker shops multiple wholesale lenders and matches the scenario to the program. The best program for your situation depends on property type, credit profile, leverage need and documentation.
Common Reasons Files Stall
| Problem | What the lender sees | What can help |
|---|---|---|
| Seasoning short | Loan or title under the minimum | Wait, or check exceptions |
| Appraisal low | Value cuts the leverage ceiling | Submit recent comparable sales |
| Ratio too high | Debts crowd income | Pay down debts before applying |
| Score under floor | Below program minimum | Ask about other programs |
| Undocumented income | Cannot verify repayment | Gather returns and statements |
| Lien issues | Second lien not subordinate | Clear title early |
Is It Worth It?
The decision is practical. Cash-out raises your balance, may lengthen your term, and costs money to arrange. “No-cost” refinances build the costs into the rate or the balance. They are not free. CFPB research found cash-out borrowers often use the money to pay down credit card and auto debt. Credit-card balances trended back toward earlier levels in the following year. A home equity loan or HELOC is the alternative; the CFPB notes home equity loans are usually repaid over a shorter period.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the appraised value of the home.
Seasoning: The minimum time you must have held the home or the loan before a lender will allow cash-out.
Limited cash-out: A refinance that pays off the first mortgage and costs with only incidental cash back.
Overlay: A lender’s own rule that is stricter than the agency rule.
Note date: The date you sign the mortgage note, used to measure seasoning.
Frequently Asked Questions
Can I do a cash-out refinance if I bought my home less than a year ago?
Usually not on a conventional loan. The first mortgage being paid off generally must be at least 12 months old, and a borrower must have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards. The wholesale no-MI lane has its own six months of seasoning.
Does a cash-out refinance require that I live in the home?
Not always. Conventional cash-out can be written on a primary residence, a second home or an investment property, and occupancy sets the leverage. A VA cash-out requires that you will live in the home.
How much cash will I actually receive?
Less than your equity. The lender applies the leverage cap to appraised value, then subtracts your payoff, any liens paid off, and financed costs. What is left is your cash.
Why did one lender say no when another said yes?
Overlays. Each wholesale lender can add its own score, leverage or reserve rules on top of agency rules. A broker can match the file to the lender whose rules fit it.
Next Step
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. CFPB: using home equity guide
2. Fannie Mae Selling Guide B2-1.3-03 Cash-Out Refinance
3. The CFPB’s ability-to-repay rule
4. Freddie Mac Guide §4301.6 Special purpose cash-out
5. VA.gov Cash-out refinance loan
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 Use a Cash-Out Refinance to Pay for Home Improvements · Cash-Out Refinance Requirements for Home Improvement Projects · Best Cash-Out Refinance Program When the Home Is Jointly Owned
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.