The Quick Read: There is no single best program. The right one depends on what the HELOC paid for and what you want to do with it now. That choice sets the loan type, and the loan type sets the leverage, the waiting periods and how much cash you can take. Conventional cash-out, FHA and VA each handle an open HELOC differently.
What Does a HELOC Do to a Cash-Out Refinance?
A HELOC is a second mortgage that sits behind your first. Any cash-out refinance has to deal with it in one of two ways. You pay it off with the new loan, or you leave it open and the HELOC lender agrees to stay in second position.
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: 7.24% as of October 29, 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.
Both paths change the loan. Pay off the HELOC and the refinance usually counts as a full cash-out, even if you take no cash home. Leave it open and you carry two payments, and the HELOC still counts against your leverage limit.
Here is the catch most people miss. Lenders often count the HELOC’s full credit limit, not just the balance you’ve drawn. An unused line still eats into your borrowing room.
Key Terms Defined
HELOC (home equity line of credit): A revolving credit line secured by your home. You borrow, repay and borrow again during a draw period. Per the federal consumer-finance regulator, it is an open-end second mortgage, and falling behind can cost you the home.
LTV (loan-to-value): Your loan balance divided by the home’s appraised value.
CLTV (combined loan-to-value): All loans against the home added together, divided by value. A HELOC left in place counts here.
Subordination: A written agreement where the HELOC lender accepts second position behind your new first mortgage.
Seasoning: The waiting period a lender wants before you refinance. It is measured from the date you got your existing loan or took title.
Limited cash-out (rate-and-term) refinance: A refinance that pays off your first mortgage and closing costs, with only a small amount of cash back.
Key Takeaways
- What the HELOC funded decides whether your refinance is “limited” or full cash-out.
- Paying off a HELOC that was not used to buy the home generally makes the loan cash-out.
- Cash-out has tighter leverage and longer waiting periods than a rate-and-term refinance.
- FHA and VA streamlines do not replace a cash-out when you want your HELOC paid off.
- Keeping a HELOC open means two payments and a subordination agreement.
How Is the Loan Underwritten, Step by Step?
Across the wholesale programs Lendmire places files with, the sequence looks the same whatever the program. Each step can change which program fits.
Step 1: Classify the HELOC. Was it used to buy the home, or for repairs, debt or personal spending? A HELOC that bought the home, especially one in first-lien position, can be paid off in a limited cash-out refinance under Fannie Mae’s Selling Guide. If it was not purchase money, paying it off pushes the loan into full cash-out.
Step 2: Pay it off or leave it. Leaving it open requires the HELOC lender to subordinate, so that the existing lien is clearly subordinate to the new mortgage. Paying it off turns the deal into cash-out.
Step 3: Check the clocks. On a conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted note date to note date. You also need to have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards. Subordinate liens of any age can be paid off.
Step 4: Count the leverage. Conventional cash-out on a one-unit primary residence tops out at 80% LTV. Two- to four-unit primary homes top out at 75%. Any HELOC you keep counts toward the combined limit. The appraisal sets the value, so a low appraisal shrinks your available cash. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Step 5: Document. Expect a payoff statement for a HELOC you are closing. Expect title work and a credit report. If the HELOC stays open, expect a subordination agreement. If it closes, lenders typically ask you to sign a freeze or closure request so it cannot be drawn again.
Step 6: Appraise. Cash-out generally requires an appraisal, because the cap depends on current value.
Which Program Fits Which Situation?
The best program for your situation depends on your existing loan type, how you used the HELOC and how much cash you want. This table matches the common scenarios.
| Your situation | Program that usually fits | What to know |
|---|---|---|
| Conventional first mortgage, HELOC paid off and cash wanted | Conventional cash-out | 80% LTV on one unit; 12-month first-mortgage seasoning |
| HELOC bought the home or is a first lien, no real cash wanted | Limited cash-out | Only incidental cash back |
| Existing FHA loan, lower payment goal, HELOC stays | FHA Streamline | No meaningful cash out |
| Existing VA loan, HELOC stays | VA IRRRL | VA-to-VA only |
| Want cash and have a VA entitlement | VA cash-out | Primary residence, certificate of eligibility |
| Want cash with FHA | FHA cash-out | 12 months of ownership and occupancy |
| Balance above the conforming limit | Jumbo lanes | Own score and leverage rules |
What the Conventional Cash-Out Looks Like
Conventional cash-out is the workhorse for a borrower who wants the HELOC gone and some cash left over. On a one-unit primary residence, the cap is 80% LTV. On two- to four-unit primary homes it drops to 75%. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Mortgage insurance matters above 80% LTV on other loan types, but a standard cash-out stops at 80%, so it usually does not apply. One wholesale lane goes further. On a conforming-balance, thirty-year fixed primary residence, it reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio ceiling, and it carries its own six months of seasoning. Not every borrower fits that lane, and it is subject to lender guidelines and full file review.
Credit floors on wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run tighter, at 36% or 45% depending on reserves and score.
Picture a homeowner who opened a HELOC to redo a kitchen and now wants one payment. Their first mortgage is two years old. They have been on title longer than six months. A conventional cash-out can pay off the HELOC and the first mortgage together, subject to the 80% cap and the appraisal. That is the standard fit.
FHA and VA: Where the Streamline Stops
Many borrowers assume a streamline can roll in a HELOC. It cannot.
The FHA Streamline requires an existing FHA loan and allows no meaningful cash out. It usually skips the appraisal and limits the credit review, but it requires a net tangible benefit. A HELOC left on the home stays there, so the HELOC lender must subordinate.
The VA IRRRL works the same way. Per VA.gov, it is available only when you already hold a VA-guaranteed loan on the property. It carries a 0.5% funding fee unless you are exempt, with no VA appraisal and seasoning of the later of 210 days and 6 payments. The practical rule is that an IRRRL leaves a HELOC in place. Paying the HELOC off takes a VA cash-out instead.
VA cash-out is for homes that you, a spouse or a dependent occupy. It requires satisfactory credit, sufficient income and a valid certificate of eligibility. It uses a VA appraisal.
FHA cash-out is stricter on leverage than many borrowers expect. HUD’s Handbook 4000.1 records that maximum LTV and combined LTV for cash-out were cut to 80%. Because the cap is combined, a HELOC that stays on the home uses up room under it. FHA also requires at least one borrower to have owned and occupied the home for 12 months before the case number is assigned.
An FHA loan carries mortgage insurance, and VA cash-out carries a funding fee. Both are described here mechanically, not as prices.
Rate-and-Term Instead: When Cash Isn’t the Goal
Sometimes the HELOC is small, or it bought the home, and you only want a better structure on your first mortgage. Rate-and-term, also called limited cash-out, goes to 95% LTV on a one-unit principal residence. It reaches 97% where the existing loan is agency-owned and a first-time-buyer program allows it. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The new loan pays off the existing first mortgage, the closing costs and a purchase-money second lien. Only incidental cash comes back. Mortgage insurance applies above 80% LTV. You can ask to cancel it at 80% of original value with good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The cash-back limit is the line to watch. Fannie Mae caps cash back on a limited cash-out refinance at the greater of 1% of the new loan or $2,000. Take more than that and the loan reclassifies.
Here’s a wrinkle. If your HELOC was not purchase money and your refinance pays it off, rate-and-term is off the table, even with zero cash back.
Where the General Rule Breaks
Rules about HELOCs have named exceptions. These are the ones that come up.
A first-lien HELOC. If the HELOC is your only mortgage, it is excepted from the 12-month seasoning test. This exception appears alongside special-purpose cash-out, construction-to-permanent loans and manufactured-home conversions.
A HELOC on a different property. Fannie Mae’s delayed-financing rules discuss a HELOC on another property used to buy a home. The settlement statement must show proceeds paying down that loan.
Disaster repairs. Fannie Mae allows limited cash-out treatment for non-purchase subordinate financing used for disaster repairs. HELOC draws qualify only if they came after the disaster.
Co-owner or divorce buyout. Fannie Mae treats this as limited cash-out if the property was jointly owned at least 12 months before disbursement.
Inherited property. FHA generally waives the 12-month ownership requirement for a property you acquired by inheritance, though the occupancy and other cash-out requirements still apply.
Not your primary home. FHA and VA cash-out both require owner occupancy. For a second home or rental, occupancy decides the leverage, and the VA and FHA cash-out routes are off the table.
Non-agency programs. These set their own classification rules. Agency treatment is a reference point, not a guarantee of how they will read your HELOC.
Texas homestead. A cash-out on a Texas homestead is capped by the state constitution at the agency figure, and the wholesale 89.99% lane is not written there.
What Changes in Your Monthly Budget and Risk
Paying off the HELOC folds it into one first mortgage. Leaving it means two payments. The CFPB notes HELOC payments depend on the outstanding balance, and the rate is usually adjustable.
Replacing the first mortgage resets the rate and the term on the whole balance. So your existing first-mortgage terms matter. If yours is strong, a cash-out may cost you more than it saves, and leaving the HELOC alone could be the better move.
A cash-out refinance carries closing costs on the whole new loan. A HELOC you leave alone avoids refinance costs but keeps its variable rate. Your Loan Estimate shows the real numbers, and comparing it line by line is the only reliable test.
Two risks deserve plain words. Your home secures both loans, so default puts the full amount at stake. And a lender can stop further HELOC draws if your home’s value drops significantly.
Lenders also want you to keep a cushion. Lenders typically expect you to retain roughly 10% to 20% of your home’s value as equity. The equity you can borrow is never all of the equity you have.
How a Broker Finds the Best Program for You
Different wholesale lenders write these programs with different overlays. One may be flexible on a recently drawn HELOC. Another may not. A broker shops several and matches your file to the program. That matching is where the value sits.
Lendmire’s cash-out refinance programs page lays out the options Lendmire arranges for primary homes in the 16 states where it handles consumer lending.
Before you apply, gather these:
- Your most recent HELOC statement, with balance and credit limit
- A note of what each HELOC draw paid for
- The date of your first mortgage and the date you took title
- Occupancy evidence, such as utility bills or employment records
- Income and asset documents, per the program
Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Frequently Asked Questions
Can I do a cash-out refinance while I still have a HELOC?
Yes, but the HELOC has to be handled. You either pay it off with the new loan or the HELOC lender signs a subordination agreement. Any HELOC left open counts toward your combined leverage limit, often at its full credit limit.
Will paying off my HELOC make it a cash-out refinance?
Usually, yes. If the HELOC was not used to buy the home, paying it off makes the refinance full cash-out under Fannie Mae’s rules, even if you take no cash. A HELOC that funded the purchase, or a first-lien HELOC, can be paid off in a limited cash-out.
Can an FHA Streamline or VA IRRRL pay off my HELOC?
No. Both are streamlines for existing government loans and allow no meaningful cash out. A HELOC stays in place and must subordinate. To pay it off with a government loan, you generally need an FHA or VA cash-out.
How long do I have to wait before a cash-out refinance?
On conventional cash-out, the first mortgage being paid off must be at least 12 months old, and you need 6 months on title. FHA requires 12 months of ownership and occupancy. VA streamlines use the later of 210 days and 6 payments. Exceptions exist for inheritance, delayed financing and first-lien HELOCs.
How much equity can I actually take out?
Less than your total equity. Conventional cash-out caps at 80% LTV on a one-unit primary home and 75% on two- to four-units, and a retained HELOC counts against that cap. The appraisal sets the value, so a low appraisal shrinks your cash. Leverage, reserves, and pricing vary by lender and program; the final terms follow the 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.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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
2. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
4. HUD Handbook 4000.1 transmittal
5. CFPB
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Home Equity Investment Payoff Requirements Before a Refinance · Combined Refinance vs Keeping Your HELOC on a Low First Mortgage · Cash-Out Refinance vs HELOC for a Homeowner Avoiding an Appraisal
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.