The Quick Read: A cash-out refinance carries pricing adjustments because the loan is riskier to the investor who buys it than a plain rate-and-term refinance. Fannie Mae and Freddie Mac charge the lender a risk-based fee set by credit score, loan-to-value ratio (LTV), and loan features. The lender then builds that cost into your rate or your points. You rarely see it as its own line item.
What Is a Pricing Adjustment, Exactly?
A pricing adjustment is a risk-based charge added to a loan’s price. The industry calls it a loan-level price adjustment, or LLPA. Fannie Mae and Freddie Mac assess it when a lender sells them the loan.
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.
Fannie Mae’s Selling Guide says an LLPA applies to certain cash-out refinances based on LTV and credit score. It also says these adjustments come on top of any other price adjustments that apply to the transaction. You can read the rule in the Fannie Mae Selling Guide section on cash-out refinance transactions.
LTV is the loan amount divided by the home’s appraised value. If you owe 60% of what the home is worth, your LTV is 60%. The more you borrow against the home, the higher that number climbs.
Think of an LLPA as the agency’s way of saying, “This loan has more risk baked in, so the price goes up.” Your lender pays it and passes it along. You pay it indirectly.
Why Does Cash-Out Cost More Than Rate-and-Term?
Cash-out loans cost more because the agencies treat them as higher risk. Higher-risk loans generally pay higher upfront fees, and the agencies keep separate pricing grids for each loan purpose.
A refinance swaps your old loan for a new one. It pays off the existing first mortgage and closing costs, and you walk away with only incidental cash. A cash-out refinance does more. It raises your balance and turns home equity into cash. You owe more afterward, and the loan sits at higher leverage.
Both agencies reflect this in how they price. Fannie Mae’s matrix has stand-alone grids for limited cash-out refinances and for cash-out refinances. Freddie Mac’s Exhibit 19 uses a base grid shared by no-cash-out and special purpose cash-out loans, and a separate section for full cash-out loans. The pricing grids are published on the Fannie Mae LLPA Matrix page.
This is not a quirk. Federal regulators pushed in this direction on purpose. The Federal Housing Finance Agency announced targeted pricing changes that removed upfront fees for certain borrowers and affordable products. It paired that with targeted increases for most cash-out refinances, starting February 1, 2023. Borrowers taking equity out now pay for the added risk. Others pay less.
Which Inputs Move the Adjustment?
Four inputs matter most: loan purpose, credit score, LTV, and loan features. The grid is built on credit score by LTV, so a higher score and a lower LTV generally mean a smaller adjustment.
Loan purpose. This picks the grid. A cash-out refinance sits on its own grid, separate from a limited cash-out or rate-and-term loan.
Credit score. Higher scores earn smaller adjustments. Lower scores earn larger ones. Across the wholesale conventional programs we place files with, the decision score starts at 620, and the automated finding governs most files. A score near that floor sits in the more expensive part of the grid. These figures are subject to lender guidelines and full file review.
LTV. On a one-unit principal residence, conventional cash-out refinances top out at 80% LTV. On two- to four-unit principal residences, second homes, and investment property, the cap is 75%. Occupancy sets the leverage. Within those caps, each step up in LTV generally lands in a higher-cost band.
Loan features. Property type, unit count, occupancy, and product type can add further adjustments. Freddie Mac’s redesign bulletin lists examples such as condos, multi-unit homes, high-balance loans, and secondary financing.
The grid cells are not reproduced in this article. They change, and a number in an article goes stale fast. Check the matrix’s effective date and ask your loan officer for the version that applies to your file.
Do the Adjustments Stack?
Yes. Adjustments are additive. A base charge for the loan purpose, credit score, and LTV sits on the grid. Then each feature of your loan can add to it.
Picture two borrowers with the same credit score and the same LTV on the same cash-out loan. One owns a single-family primary residence. The other owns a two-unit property. The second borrower will usually carry a larger total adjustment, because the unit count adds its own layer.
The same goes for a condo, a second lien taken alongside the refinance, or a high-balance loan. Each can add a layer. Stacking is why two quotes for “a cash-out refinance” can differ so much.
How Does the Cost Reach Your Quote?
The agency charges the lender when it sells the loan. The lender cannot absorb that cost forever, so it builds it into one of three places: your interest rate, your points, or a reduction in the lender credit you might otherwise get.
Here is how a quote is built, step by step:
1. Classify the loan purpose. Cash-out, limited cash-out, or rate-and-term. This picks the grid.
2. Set the denominator. The appraisal sets the home’s value. Your LTV is the loan divided by that value, and combined LTV adds in other liens.
3. Read the credit score band. Score and LTV together locate you on the grid.
4. Add the attributes. Condo, unit count, occupancy, and similar features add more.
5. Choose how to pay it. The total can show up as a higher rate, as points at closing, or as lower lender credits.
The agency adjustment is not usually itemized on your paperwork. What you see on your Loan Estimate and Closing Disclosure is the resulting rate and cost. Ask your loan officer to walk you through how the quote was built. A good one can.
Rate, Points, or Credit: The Trade-Off
A discount point is a fee equal to one percent of the loan amount. According to the CFPB’s report on upfront fees, a point has no fixed value in rate terms, and most borrowers benefit only if they keep the loan long enough for the monthly savings to outweigh the upfront cost.
That is the break-even idea. Paying points makes sense if you plan to stay put. It does not if you may sell or refinance again soon. Lender credits run the other way: they lower closing costs in exchange for a higher rate.
Judge total cost, not just the rate.
Cash-Out vs. Limited Cash-Out vs. Rate-and-Term
| Factor | Cash-Out | Limited Cash-Out | Rate-and-Term |
|---|---|---|---|
| What you get | Real cash from equity | Only incidental cash | Only incidental cash |
| Pricing treatment | Highest-cost grid | Lower-cost grid | Lower-cost grid |
| Leverage cap (one-unit primary) | 80% LTV | Up to 95% LTV | Up to 95% LTV |
| Seasoning on current loan | 12 months | Generally lighter | Generally lighter |
On the wholesale programs we arrange files through, a one-unit primary residence rate-and-term refinance can reach 95% LTV, and 97% on the first-time-buyer programs where the existing loan is agency-owned. A cash-out stops at 80%. That gap is why a plain refinance and a cash-out can look so different on paper. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Incidental cash back on a rate-and-term is small. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000. Beyond that, the loan is a cash-out.
Where the General Rule Breaks
The idea that cash-out always carries the highest price has exceptions. These are the ones that matter.
Student loan cash-out refinances. Fannie Mae waives the cash-out LLPA for loans that meet its student loan cash-out requirements and charges the limited cash-out LLPAs instead. The standard cash-out LTV limits still apply. Miss a requirement and the loan is priced as a regular cash-out.
Freddie Mac special purpose cash-out. These loans are priced on the no-cash-out grid rather than the cash-out grid.
Texas homesteads. A cash-out on a Texas homestead, known as a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution. The wholesale lane described below is not written there.
The no-mortgage-insurance lane. Mortgage insurance is generally required above 80% LTV on the agency path, and it cancels at 80% on request and ends automatically at 78%. One exception exists: a wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio. It requires a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. Not every borrower fits that box, and it is subject to lender guidelines.
Manufactured homes. Single-width manufactured homes are limited to purchase and limited cash-out refinances. They cannot do a cash-out on a primary residence.
Fees change. Freddie Mac dropped its Market Condition Credit Fee in 2021. Always check the effective date of the matrix behind your quote.
One more point on averages. The FHFA’s guarantee-fee report puts the average upfront fee on cash-out refinances at 85 basis points. That is an industry-wide average, not your price. Your own adjustment depends on your score, your LTV, and your loan’s features.
What About FHA and VA?
FHA and VA do not use the conventional grid. Their costs come from other mechanisms.
FHA. A cash-out is capped at 80% of adjusted value. Older material showing 85% is outdated. FHA’s cost is a mortgage insurance premium, not a LLPA. The FHA Streamline is a different product. It applies to an existing FHA loan, takes no cash out, and skips the appraisal and most of the credit review but requires a net tangible benefit.
VA. A cash-out can take equity out or move a non-VA loan into a VA-backed loan. You go through a private lender, and terms and fees vary. VA charges a one-time funding fee instead of monthly mortgage insurance, and some borrowers are exempt. The VA IRRRL is VA-to-VA only, takes no cash out, and carries a 0.5% funding fee unless exempt. It also needs a net tangible benefit and seasoning of the later of 210 days and six payments.
How Can You Reduce the Adjustment?
You have a few levers. None is magic.
- Borrow less. A smaller cash-out lowers your LTV, which can move you into a cheaper band. Taking only what you need often beats taking the maximum.
- Raise your credit score. Paying down revolving balances before the credit pull can lift your score into a better tier.
- Check seasoning. Two separate clocks apply: 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 6 months. Exceptions exist for delayed financing, inheritance, and legal awards.
- Ask whether you qualify for an exception. A qualifying student loan payoff is the clearest case.
Our own cash-out refinance programs page lays out how the network’s cash-out lane is structured.
When Another Option Fits Better
The adjustment is a real cost. Sometimes it outweighs the benefit.
If you only need a small amount of cash, a second lien or a home equity line may cost less, because it leaves your first mortgage untouched. A cash-out replaces the first mortgage. It is not a separate second lien. That matters when your current loan is a good one you would rather keep.
A rate-and-term refinance fits if your goal is a lower rate or a different term and you do not need cash. It prices on a cheaper grid and can reach higher leverage.
If you use cash-out money to clear credit card debt, budgeting discipline matters. Pay off the cards, then keep the balances low. Otherwise the cash-out only moves the debt onto your house.
Key Terms Defined
LLPA (loan-level price adjustment): A risk-based charge Fannie Mae and Freddie Mac assess on a loan when the lender sells it.
LTV (loan-to-value): The loan amount divided by the home’s appraised value.
Combined LTV: LTV that also counts other liens on the home.
Lender credit: Money from the lender that lowers closing costs in exchange for a higher rate.
Seasoning: The waiting period a lender requires before you can refinance or cash out.
Limited cash-out: A refinance with only small, incidental cash back.
What Should You Ask Your Loan Officer?
Bring these four questions:
1. Which grid does my loan fall on, and what is the effective date?
2. How much of my quote comes from the cash-out adjustment versus other features?
3. What would the quote look like if I borrowed less?
4. Can you show me the loan with points, without points, and with credits?
Frequently Asked Questions
Is the pricing adjustment a fee on my Closing Disclosure?
Usually not. The agency charges the lender, and the lender builds the cost into your rate, your points, or your credits. You see the result, not the adjustment itself. Ask your loan officer to explain how your quote was built.
Does taking out less cash lower my cost?
Often, yes. A smaller cash-out means a lower LTV, and lower LTV generally lands in a cheaper band on the grid. The change depends on where your numbers fall, so compare quotes at a few different loan amounts.
Is cash-out pricing the same as a rate-and-term refinance?
No. Both agencies keep separate base grids by loan purpose. A cash-out is generally priced higher than a rate-and-term for the same borrower, and it also caps leverage at a lower LTV on a one-unit primary residence.
Can the adjustment be waived?
Sometimes. Fannie Mae waives the cash-out LLPA for loans that meet its student loan cash-out requirements and prices them on the limited cash-out grid instead. Outside narrow cases like that, the adjustment applies.
Do second homes and multi-unit properties cost more?
Generally, yes. Occupancy and unit count are loan features that can add to the adjustment, and leverage caps are lower: 75% for two- to four-unit principal residences and second homes. Everything here is subject to lender guidelines and full file review.
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.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. 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: Cash-Out Refinance Transactions
3. FHFA: Targeted Pricing Changes
4. Freddie Mac Exhibit 19 redesign bulletin
5. CFPB: Upfront Fees and Discount Points
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Appraisal Waiver vs Full Appraisal on a Cash-Out Refinance · How to Size a No Cash-Out Refinance Loan to Your Payoff · Banks That Offer a Cash-Out Refinance for a Large Cash-Out Amount
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.