The Quick Read: It depends on which property you pull the equity from and what your file looks like. For most homeowners the strongest route is a conventional cash-out refinance on the home they live in, because a primary residence gets the highest leverage, 80% LTV on a one-unit home, subject to lender guidelines. The FHA Streamline, VA streamline refinance and limited cash-out refinances cannot pay you cash. Your income, credit, seasoning and the new payment decide the rest.
What Does a Cash-Out Refinance Actually Do Here?
A cash-out refinance replaces your current mortgage with a larger one and hands you the difference. You can spend that cash on anything, including a down payment on a rental.
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.
Two loans come out of this. The first is the new mortgage on your current property. The second is whatever financing you arrange on the property you’re buying. Each has its own test. Files go sideways when a borrower plans for one and forgets the other.
Lendmire’s cash-out refinance programs page covers the loan options in more detail. Lendmire is a mortgage broker. It arranges these loans through wholesale lenders and does not lend itself.
What Does “Best Program” Mean?
There’s no single best program. The best program for your situation depends on occupancy, credit, how much equity you hold and how long you’ve owned the home. A broker shops several wholesale lenders and matches the file to the program that fits. Across the wholesale programs Lendmire places files with, four things decide the match:
- Which property secures the new loan.
- How much cash you need compared with the equity available.
- Your credit score and total debt ratio.
- Whether the loan you have now meets the seasoning rules.
Here is how the options compare, using Lendmire’s program parameters. Every figure is subject to lender guidelines and full file review.
| Program | Cash to you? | Leverage (LTV) | Fit for this goal |
|---|---|---|---|
| Conventional cash-out, one-unit primary | Yes | 80% | Strongest standard route |
| Conventional cash-out, 2-4 units, second home, investment | Yes | 75% | Lower leverage, tighter file |
| Wholesale no-MI cash-out lane | Yes | Up to 89.99% | Narrow: 680 score, 50% ratio, conforming |
| Rate-and-term (limited cash-out) | No, only incidental | Not applicable | Wrong tool |
| FHA Streamline / VA streamline refinance | No | Not applicable | Wrong tool |
The no-MI lane is a thirty-year fixed on a primary residence at a conforming balance. It has its own six months of seasoning. It is not written in Texas.
Which Refinances Can’t Fund a Down Payment?
Three products look right and aren’t: the limited cash-out refinance, the FHA Streamline and the VA streamline refinance. They are built to lower a payment or change a term, not to pay out equity.
A limited cash-out refinance pays off your existing first mortgage, closing costs and any purchase-money second. Only incidental cash comes back. Fannie Mae’s limit is the lesser of 2% of the new loan amount or $2,000. That sliver of cash is not a down payment.
The FHA Streamline works on an existing FHA loan. It needs a net tangible benefit and does not pay cash. The VA streamline refinance works on an existing VA loan and carries a 0.5% funding fee unless you’re exempt. It also needs a net tangible benefit and does not pay cash either.
Skip all three if your goal is cash. FHA and VA do offer cash-out refinances on owner-occupied homes. Those are separate products with their own rules, laid out in HUD Handbook 4000.1.
How Is the Loan Underwritten, Step by Step?
The lender treats this as a standard cash-out refinance on the property that secures it. The steps run in a fixed order.
1. Pick the program and the cash amount. Start from the down payment you need, not the maximum available.
2. Underwriting. The lender reviews income, assets, credit and total debt ratio. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files. The total ratio ceiling is 50%. Manually underwritten loans use 36% or 45% with reserve and score factors.
3. Debt ratio. The new, larger payment goes into your ratio. The planned rental’s payment may count too, depending on how the lender treats it. Check this early.
4. Appraisal. Value times the LTV cap sets the maximum loan. Cash to you is that maximum minus your payoff, closing costs and other liens.
5. Documents. Expect pay stubs, traditional personal-income documentation, bank statements, a payoff statement and proof of homeowner’s insurance.
6. Closing and disbursement. You receive the Loan Estimate and Closing Disclosure as the deal works, since this is a consumer mortgage.
The agency rules are public. Fannie Mae’s Selling Guide section B2-1.3-03 defines cash-out transactions, and Freddie Mac’s Guide section 4301.5 covers the same ground.
Primary Home or the Rental Itself?
Pull from the home you live in when you can. Occupancy sets leverage: a one-unit primary residence reaches 80% LTV. A two- to four-unit primary residence, a second home or an investment property reaches 75%. A cash-out can be written on any of these property types, so the home you pull from does not have to be the one you live in.
The primary home usually gives the better leverage. The cost is risk. Your own house now secures the purchase of the next one. If rents dip or the new property sits empty, the debt on your residence still has to be paid.
Pulling equity from an existing rental keeps your home out of it. The tradeoff is the lower 75% cap and a tighter file. There is also a third option: a home equity loan or HELOC leaves your first mortgage alone. If your current loan is older and well-structured, replacing it reprices the entire balance. That is the cost of a cash-out that a HELOC avoids.
Run both. It’s a genuine toss-up on some files. A borrower with a strong primary-home equity position and thin rental history often does better from the home. A borrower with a seasoned, well-covered rental may prefer to leave the home untouched.
Where Does the General Rule Break?
Five edge cases show up most: seasoning, the no-MI lane’s own clock, the Texas homestead, loan limits and credit events.
Seasoning. The first mortgage being paid off must be at least 12 months old, measured note date to note date. A borrower must also have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards. Files that assume seasoning away get kicked back.
The no-MI lane’s own clock. That lane carries its own six months of seasoning. A recent purchase can fit one rule and miss the other.
Texas homestead. A cash-out on a Texas homestead is a Section 50(a)(6) loan, capped by the state constitution at 80% of the home’s value. The wholesale no-MI lane is not written there.
Loan limits. Above the conforming limit, jumbo lanes take over. They use a 660 decision score, leverage up to 90% and loans up to $5,000,000, with a 50% ratio ceiling on the fixed lanes. Different rules apply, so confirm which lane your balance lands in.
Credit events. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
What Does Mortgage Insurance Do on a Cash-Out?
Mortgage insurance is required above 80% LTV on the agency path, except in the wholesale no-MI cash-out lane described above. When it applies, you can request cancellation at 80% of the original value, with good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78% under the Homeowners Protection Act. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is the program sheet’s range, not a quote. A conventional cash-out on a one-unit primary tops out at 80%, so most standard cash-outs sit at or below the threshold anyway.
What Happens to the Household’s Numbers?
The effects stack. They are worth seeing before you apply.
- The home’s payment rises. The balance is larger, and the whole loan reprices.
- A second payment arrives. The rental has its own financing.
- Closing costs apply to the whole new loan, not just the cash you take.
- Equity falls. So does your cushion if values drop.
- Qualifying gets harder. Both payments hit your debt ratio, and rental income may not count right away. Lenders apply their own documentation rules to it.
For the new purchase, the lender may also want to see where the down payment came from. Cash that lands in your account and sits there is easier to document than cash that moves straight through. Keep the settlement statement from the cash-out. It is your paper trail.
Three Borrower Profiles, Three Paths
Consider a homeowner with a one-unit primary residence, a long-held mortgage past 12 months and a score well above the floor. The natural fit is a conventional cash-out at up to 80% LTV. The number to watch is total debt ratio once both payments are counted. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Picture a homeowner with a 680 score, a thirty-year fixed on a primary residence, a conforming balance and a debt ratio under 50%. That borrower is the one the no-MI wholesale lane was built for. The leverage reaches 89.99%, and the file must clear its own six-month seasoning.
Say you bought your home recently. The 12-month rule on the loan being paid off blocks a standard cash-out. A HELOC isn’t governed by the same rule, so it is worth pricing, or you can wait out the seasoning period.
Risks and When Not to Do It
Don’t use this strategy when the new property’s numbers only work in a best-case scenario. Your home is the collateral for the cash. Lenders look at reserves on other financed properties, so confirm the requirement before you commit.
Cash-out pricing generally runs higher than a refinance. Weigh that against alternatives. If you have a low-cost first mortgage, replacing it to free cash may cost more than leaving it and using a second lien.
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
Cash-out refinance: A new, larger mortgage that pays off the old one and sends you the difference in cash.
LTV (loan-to-value): The loan amount divided by the appraised value of the property.
Seasoning: The minimum time you must have held the loan or the title before a cash-out is allowed.
Limited cash-out refinance: A refinance that pays off the old loan and costs but returns only incidental cash.
Delayed financing: An exception that lets a recent cash buyer take a cash-out sooner than the standard seasoning would allow.
Net tangible benefit: A required improvement to the borrower’s position, such as a lower payment, on FHA Streamline and VA IRRRL loans.
Frequently Asked Questions
Can I use a cash-out refinance on my home for a down payment on a rental?
Yes. Cash from a cash-out refinance can be used for any purpose, including a down payment. The new loan on your home is underwritten as its own file. The purchase of the rental then gets its own review, and the lender may ask where the down payment came from.
Can an FHA Streamline or VA IRRRL give me cash?
No. Both exist to lower a rate or payment on an existing government loan. FHA and VA do offer separate cash-out refinances on owner-occupied homes, which follow their own rules.
How much of my equity can I take?
Less than all of it. A conventional cash-out reaches 80% LTV on a one-unit primary residence and 75% on two- to four-unit homes, second homes and investment property. A wholesale no-MI lane reaches 89.99% for qualifying primary-residence files. Each is subject to lender guidelines and full file review.
Do I have to have owned the home for a certain time?
Yes. The loan being paid off must be at least 12 months old, and the borrower must have been on title for 6 months. Delayed financing, inheritance and legal awards are exceptions.
Is a HELOC better than a cash-out refinance?
It depends. A HELOC leaves your first mortgage untouched, which matters if that loan is a good one. A cash-out reprices the whole balance but can reach more cash in one loan. Compare both against your current loan.
Where to Go From Here
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
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. Fannie Mae Selling Guide B2-1.3-03
2. Freddie Mac Guide Section 4301.5
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Cash-Out Refinance Program With a Co-Signer on the Loan · Best Cash-Out Refinance Program After Converting a Detached Garage to an ADU · Best Cash-Out Refinance Program When Ownership Seasoning Rules Decide Your Timing
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.