The Quick Read: The best program is the one your current loan, your occupancy, and your income allow. For most homeowners that means a conventional cash-out refinance. FHA and VA cash-out loans fit borrowers who already live in those lanes. The sequence matters most: refinance the home you live in, then buy the next one. Streamline refinances are not equity tools.
Key Takeaways
- A cash-out refinance replaces your mortgage with a bigger one and pays you the difference. That cash can fund a down payment.
- Conventional cash-out tops out at 80% of the home’s value on a one-unit primary residence.
- Your loan and your time in the home decide eligibility. Equity only sets the ceiling.
- The next lender will count both housing payments if you keep the old home.
- Moving out before the refinance closes is the hardest case. Talk to a loan officer first.
What Does a Cash-Out Refinance Do for a Home Purchase?
A cash-out refinance turns equity in your current home into spendable money. You take a new loan larger than what you owe. It pays off the old mortgage and any liens being cleared. It covers financed costs. You get what is left.
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.
Equity is the gap between what the home is worth and what you owe. You cannot borrow all of it. The program’s loan-to-value limit (LTV, the new loan as a percentage of appraised value) sets the cap.
Picture the plan in two moves. First, you refinance the home you live in and collect the cash. Second, you use that cash toward the down payment and costs on the next primary home. Lenders generally treat money borrowed against an asset you own as an acceptable source of funds, because it is a return of your own equity. Each purchase lender applies its own review, so ask yours.
A cash-out refinance is a different tool from a rate-and-term refinance. A rate-and-term loan changes your rate or term and returns only incidental cash. If you only want a better loan on the same home, that is a separate path. It is not the equity route.
Which Program Fits Your Situation?
The program is chosen by your existing loan type and occupancy, not by a ranking. Across the wholesale programs Lendmire places files with, the right fit depends on whether you hold a conventional, FHA, or VA loan today. It also depends on how long you have lived in the home, your credit profile, and how you document income.
Lendmire’s cash-out refinance programs page lays out the lanes in more detail. This is how they compare for a buyer funding the next home:
| Program | Who it fits | How it treats cash |
|---|---|---|
| Conventional cash-out | Most owner-occupants with equity | Cash back up to the LTV cap |
| FHA cash-out | Owner-occupants who qualify for FHA | Cash back, with its own limits |
| VA cash-out | Eligible veterans and service members | Cash back, funding fee may apply |
| FHA Streamline / VA streamline refinance | Existing FHA or VA loan holders | Little to no cash |
Here is how to read your row:
- You have a conventional loan and 20% or more equity. Conventional cash-out is the natural starting point.
- You have an FHA loan. A streamline lowers your cost but returns almost no cash. For cash you need an FHA cash-out or a switch to conventional.
- You are a veteran with a VA loan. The VA cash-out path is available. A VA cash-out is also the only route to refinance a non-VA loan into a VA loan. VA.gov says it is obtained through a private lender and that a funding fee may apply.
- Your balance is above the conforming limit. The jumbo lanes take over, with their own credit and ratio rules.
- Your income is hard to document the usual way. Tell your broker early. Documentation options change which lender fits.
Why does that matter? Brokers see this every week. The same borrower can look strong at one lender and marginal at another. Lendmire is a broker, so it shops several wholesale lenders and matches the file to the program. It is not itself a lender.
How Conventional Cash-Out Is Underwritten, Step by Step
Conventional cash-out follows a fixed path. Knowing it lets you spot problems before you apply.
Step 1: Check the two clocks. Conventional cash-out has a title clock and a loan-age clock. At least one borrower must have been on title for six months. The first mortgage being paid off must also be at least 12 months old, counted note date to note date. There are exceptions. Delayed financing covers a recent all-cash purchase, and inheritance and legal awards have their own treatment.
Step 2: The appraisal sets the ceiling. The new loan cannot exceed the maximum LTV times the appraised value. On a one-unit primary residence, conventional cash-out reaches 80% LTV. On two- to four-unit properties it is 75%. Fannie Mae’s Eligibility Matrix shows the same split. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Step 3: The loan pays off first, and you get the rest. The new loan pays your existing first mortgage and any liens being cleared. It can also cover closing costs and points. Fannie Mae’s Selling Guide lists financing those costs as an acceptable use. What remains is your cash.
Step 4: Full underwriting. The lender verifies income, assets, credit, and your debt-to-income ratio (DTI, monthly debts as a share of monthly income). Lenders must make a good-faith finding that you can repay. Expect to document income and assets. The 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 at 36% or 45%, with reserve and score factors from the Eligibility Matrix. Higher ratios can also mean extra reserves.
Step 5: Closing and disbursement. On conventional loans, the ownership clocks run to the day funds are disbursed. Plan around that, not around the day you apply.
One more route: a wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed rate. It is limited to a primary residence at a conforming balance, and it carries its own six months of seasoning. In Texas, the state constitution caps a homestead cash-out at the agency figure, and that wholesale lane is not written there. All of this is subject to lender guidelines and full file review.
A Worked Example in Percentages
Skip the dollar signs and think in percentages of your home’s value. Say your home appraises at 100% and you owe 55% on the existing first mortgage.
Conventional cash-out on a one-unit primary residence caps the new loan at 80%. Paying off the 55% balance leaves 25% of the home’s value before costs. Closing costs and any financed points come out of that 25%. What remains is your net cash.
Now the purchase. Some conventional programs allow up to 97% financing for a first-time buyer on a fixed-rate loan. A borrower who owned a home in the last three years is not a first-time buyer. So the next home needs 5% down, plus its own closing costs and reserves. Compare that need to your net cash. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The new home’s price drives the math. A lower-priced next home leaves a cushion in your cash. A stretch purchase can leave you short. That is why borrowers run both numbers before they list or write an offer.
Two warnings. Financed fees shrink your net cash, so available cash is smaller than your equity. And a low appraisal shrinks the ceiling. If the home appraises under your estimate, the cash drops with it.
Qualifying With Two Housing Payments
The next lender looks at your new payment. If you keep the old home, it also counts the payment on the refinanced home. That raises your DTI.
Here is what lenders look at in that case:
- Your income against both payments together.
- Reserves in the bank after the down payment.
- Credit history and score against the program floor.
- Whether the cash from the refinance is documented and sitting in your account.
Keeping the old home affects both the cash-out loan and the purchase. Selling it changes the picture. If you sell, the sale pays off the larger refinance balance, and the second payment goes away. But the sale also has to fit your timeline. Many buyers find the cleanest plan is to run the refinance numbers and the purchase numbers as one package before committing.
Lendmire’s piece Can You Use a Cash-Out Refinance to Buy a New Primary Home? covers the keep-or-sell choice in more depth.
Where the General Rule Breaks
The rules above fit a home you live in today. These edge cases need a closer look.
Moving out before closing. This is the hardest case. Freddie Mac’s guide requires all borrowers to occupy the property on a primary-residence cash-out. VA cash-out is also built around a home you occupy. FHA cash-out has its own occupancy history. None of these rules cleanly address what happens if you move out before closing. Talk to a loan officer before you apply, not after.
Limited cash-out is not a cash source. It is a rate-and-term loan with only incidental cash back. It runs up to 95% LTV on a one-unit principal residence, and up to 97% where the existing loan is agency-owned and the first-time-buyer program allows. Paying off a second lien that funded other spending can also flip a loan into the cash-out category. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Streamlines return little or no cash. The HUD FHA Streamline page says the loan being refinanced must already be FHA-insured and current. It must produce a net tangible benefit, meaning a real gain for you. Cash back is capped at a token amount. The VA IRRRL is VA-to-VA only, and it carries a 0.5% funding fee unless you are exempt. It also has seasoning of the later of 210 days and six payments. Neither one funds a down payment.
Free-and-clear homes. If you own your home outright, a new loan on it is still treated as cash-out.
Delayed financing. A recent all-cash buyer can skip the title wait. The new loan is capped at the documented amount invested plus financed costs, and it is priced as cash-out.
Co-owner buyouts. These are a recognized special-purpose cash-out, exempt from the 12-month seasoning rule on the loan being paid off.
Cash-Out vs. Other Ways to Use Your Equity
Cash-out is one tool among several. This is how they compare:
| Option | Your current mortgage | Best fit |
|---|---|---|
| Cash-out refinance | Replaced with a larger loan | Strong equity, plan to keep the new loan |
| Home equity loan or HELOC | Stays in place | Existing loan has terms worth keeping |
| Sale contingency | Stays until the home sells | Buyer who can wait on the sale |
| Sell first, then buy | Paid off at sale | Buyer who can rent or bridge a gap |
The big tradeoff is what happens to your existing loan. A cash-out refinance replaces it, so the new terms apply to the whole balance. If your current loan has terms you like, that is worth weighing. A cash-out refinance may also stretch your payoff timeline and raise your monthly payment.
There is no universal winner. A homeowner with a loan they would not give up may lean toward a second lien. A homeowner who already wants a new loan, or who will sell the old home soon, may find cash-out cleaner.
Pros, Cons, and Risks
What cash-out does well. It turns locked equity into a down payment without selling first. It can cover closing costs within the LTV limit. And it lets you shop the new purchase with cash in hand.
- A bigger loan on a home that now secures more debt.
- A new loan term and payment that apply to the entire balance.
- Pricing that runs higher than rate-and-term. That is a general feature of cash-out loans, not a quote.
- Mortgage insurance above 80% LTV on the next purchase. It can be requested off at 80% of original value with good payment history. Servicers must end it automatically at 78%.
- Your home stays on the hook. If you cannot make the payments, you risk losing it.
Key Terms Defined
Cash-out refinance: a new, larger mortgage that pays off your old one and gives you the difference in cash.
LTV (loan-to-value): the loan amount as a percentage of the home’s appraised value.
Seasoning: the waiting period a lender requires, such as how long you have owned the home or held the loan.
Rate-and-term refinance: a refinance that changes your rate or term and returns only incidental cash.
DTI (debt-to-income): your monthly debt payments divided by your monthly income.
Delayed financing: a conventional exception that lets a recent all-cash buyer take cash out without the usual wait.
What to Do Next
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. Start by writing down your loan type, your time in the home, and the price range of the next one. Then call 828-256-2183 or request a quote. Lendmire is a mortgage broker, so the loans are placed through wholesale lenders, and every program is subject to lender guidelines and a full file review.
Frequently Asked Questions
Can I use a cash-out refinance as the down payment on a new primary home?
Yes, in most cases. The cash comes from your own equity, and lenders generally accept it as a source of funds for the down payment, closing costs, and reserves. Each purchase lender applies its own review, so confirm yours. Keep the money documented in your account, and line up the refinance before you write an offer.
Can I do a cash-out refinance after I list my home?
It is possible but harder. Conventional and VA cash-out are built around a home you occupy. If you list first and then move out, you may no longer fit the occupancy rule. If you plan to sell, speak with a loan officer before you list.
Can an FHA Streamline or VA IRRRL fund my down payment?
No. Both are streamlines for existing loans, and they return little or no cash. The FHA Streamline needs an existing FHA loan and a net tangible benefit. The IRRRL needs an existing VA loan. If you need equity, look at cash-out.
Does the old home have to stay my primary residence?
For the cash-out refinance, yes, you must occupy it when the loan closes. After that, what you do with the home depends on the loan terms and your plans. If you keep it, the next lender will count both payments.
How much cash can I actually take out?
Less than your equity. The cap is 80% of appraised value on a one-unit primary residence for conventional cash-out. The new loan first pays off what you owe, then covers financed costs. The remainder is your cash, and a low appraisal shrinks it.
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. VA.gov, Cash-Out Refinance Loan
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Freddie Mac Guide Section 4301.5, Cash-Out Refinance Mortgages
5. HUD, FHA Single Family Streamline
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 Apply for a Cash-Out Refinance on Your Primary Home · How to Get a Cash-Out Refinance After Buying a Home With Cash · How a Lender Weighs Equity and Credit on a Primary Home Refinance
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.