The Quick Read: There is no single best program. The right one depends on how much equity you hold, what loan you have now, and whether you want cash up front or money released as work is finished. A cash-out refinance replaces your whole first mortgage, so it fits large projects better than small ones. A renovation-specific loan or a second loan may cost less.
Key Takeaways
- A cash-out refinance swaps your current mortgage for a bigger one and hands you the difference in cash.
- Conventional cash-out tops out at 80% loan-to-value on a one-unit primary home, subject to lender guidelines.
- Renovation products release money in stages. Plain cash-out gives it to you at closing.
- Keeping a good existing mortgage and borrowing separately can beat refinancing it.
- Every figure here depends on full file review and is not a commitment to lend.
What Is a Cash-Out Refinance, Exactly?
A cash-out refinance is a new first mortgage, larger than the one you owe, where you keep the difference as cash. Say you owe 50% of your home’s value and the new loan is 70%. The new loan pays off the old one, covers closing costs, and the rest lands in your hands.
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.
Freddie Mac’s guide says cash-out proceeds carry no specific restrictions on how you use them. Kitchens, roofs, additions, all fair game. The money is yours to spend.
Here’s the catch. You are not borrowing just the renovation money. You are re-borrowing the entire mortgage at today’s terms. That matters most if your current loan is better than what’s available now.
Why Is There No Single “Best” Program?
Because the programs solve different problems. Across the wholesale programs we place files with every week, the winning choice usually turns on four things:
1. Is the home your primary residence?
2. What kind of loan do you hold today: conventional, FHA, VA?
3. How much equity do you have after the work is done?
4. Do you need all the cash at once, or in draws?
The lenders that write these loans, and the program that fits you, depend on those answers. A broker like Lendmire shops several wholesale lenders and matches your scenario to the program, rather than pushing one product.
Which Programs Can Fund a Renovation?
Four lanes cover most homeowners. This table lays out how they differ.
| Program | Best for | Cash to you? | Main tradeoff |
|---|---|---|---|
| Conventional cash-out | Large project, solid equity | Yes, at closing | Replaces entire first mortgage |
| Conventional renovation loan | Phased or uncertain costs | Staged draws | More paperwork, contractor rules |
| FHA cash-out | Lower credit profiles, primary home | Yes | Equity cushion required, mortgage insurance |
| VA cash-out | Eligible veterans | Yes | Funding fee may apply |
Let’s take each in turn.
Conventional cash-out
This is the standard route. On a one-unit primary residence, the cap is 80% LTV. LTV, or loan-to-value, is your loan balance divided by your home’s appraised value. Two- to four-unit primary homes, second homes, and investment properties top out at 75%. If your home is a rental, occupancy decides the leverage, so keep that cap in mind and move on. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Seasoning applies. The first mortgage being paid off must be at least 12 months old, counted note date to note date. At least one borrower must also have been on title for six months. Exceptions exist for delayed financing, inheritance, and legal awards.
One wholesale lane stretches to 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% ratio on a 30-year fixed primary residence at a conforming balance. 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. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Conventional renovation loans
Fannie Mae’s HomeStyle Renovation lets you finance repairs inside a first mortgage instead of a second loan, per its product sheet. Loan purpose is a purchase or a limited cash-out refinance. Any renovation works if it is permanently attached to the property.
Two points surprise people. First, a limited cash-out version gives you no cash back. The money sits in a controlled account and goes out as work is verified. Second, the work generally must be completed within a set window after closing, and that window varies by program and lender. Freddie Mac offers a sibling product, CHOICERenovation. Freddie treats it as a “no cash-out” refinance when proceeds fund only eligible improvements.
This also sidesteps seasoning. Freddie’s 12-month rule on the loan being paid off does not apply to renovation loans, according to its bulletin.
FHA cash-out
FHA cash-out is for owner-occupied primary homes only. The cap is 80% of adjusted value, and it applies to combined loan-to-value, so a second lien counts. Older articles still say 85%. That changed for cases assigned on or after September 1, 2019, per HUD. Credit minimums vary by lender overlay, and some set a higher floor than others.
VA cash-out
VA.gov lists home improvements as a permitted use. You need a Certificate of Eligibility. A private lender makes the loan; VA guarantees it. A funding fee may apply at closing, and some borrowers are exempt. VA loans carry no private mortgage insurance.
One quirk helps. A cash-out is the only way to move a conventional or FHA loan into a VA loan. The VA IRRRL, the streamline, is VA-to-VA only and gives you no cash.
Where the Rule Breaks: Streamlines Can’t Fund Projects
Two refinances sound helpful and aren’t. The FHA Streamline needs an existing FHA loan and pays off that loan plus costs. No cash. The VA IRRRL does the same for VA loans. Both are great for lowering what you pay on a loan you already hold. Neither pays a contractor.
Another break point: a second lien. On Fannie Mae, paying off a second mortgage that wasn’t used to buy the home can push a “limited” refinance into full cash-out territory. Check this early if you have a HELOC.
Should You Refinance Everything or Borrow Separately?
This is the question most pages skip. Refinancing the whole mortgage reprices all of it. If your current loan is better than what’s available now, you give that up to borrow a slice of money.
Run it as a thought exercise. Say you owe a modest balance on a loan you love and need a small-to-medium project. A home equity loan or HELOC leaves the first mortgage untouched. Comparing those options side by side is worth doing before you decide.
Flip it. You have a large project, a loan you don’t love, and plenty of equity. Now one new mortgage can make sense, because you were going to reprice anyway. This one’s a genuine toss-up for many borrowers, and it comes down to your existing loan against the size of the project.
Both paths carry closing costs. A new first mortgage means a full set: origination, appraisal, title, recording. Costs sometimes get described as “built into the rate or the balance,” which is mechanics, not magic. Your Loan Estimate lays everything out so you can compare.
How Does Underwriting Work, Step by Step?
1. Pick the structure. Full cash-out, renovation loan, or a government option.
2. Eligibility screen. The gates are occupancy, time on title, age of the loan being paid off, payment history, LTV against the cap, plus credit and debt-to-income.
3. Documents. Expect income, assets, credit, title, and a payoff statement. Renovation loans add a contractor agreement and budget.
4. Appraisal. On renovation loans, value is generally based on the as-completed value. Fannie’s HomeStyle refinance LTV uses the lesser of the original loan plus renovation cost or the as-completed value. VA cash-out uses a VA appraisal to set the maximum.
5. Closing, then draws or cash. On a renovation loan, the contractor requests draws, the lender inspects, and funds go out against lien waivers.
The credit side works like this. 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 36% or 45% depending on reserves and score. Jumbo lanes start at 660 and reach 90% leverage. Mortgage insurance applies above 80% LTV on rate-and-term loans.
How Do You Size the Loan?
Start with contractor bids, then add a cushion. Overruns are the most common failure on projects. A buffer of your own keeps a surprise from stalling the work.
Then check the appraisal. A low appraisal shrinks the loan you can take, and the project may need trimming. On renovation loans, the as-completed value helps, but it is still an estimate.
Be honest about return, too. Some projects add value, others mostly add enjoyment. Borrowing against your home for a project you love is fine. Just know which kind it is.
What Do Lenders Look For?
- Primary residence occupancy, with every borrower living in the home.
- Equity that survives the LTV cap.
- A clean payment history on the current mortgage.
- Credit and income that clear the automated finding.
- For renovation loans, a contractor and timeline that fit program rules.
After a credit event, waiting periods are the agencies’ rules: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Shorter periods are possible with documented extenuating circumstances.
What Are the Risks?
Your home secures the loan. A larger balance may raise your payment and lengthen your payoff. You also lose any favorable rate on the old mortgage. Cost overruns can leave you with half a kitchen.
Key Terms Defined
Cash-out refinance: a new, larger first mortgage that pays off the old one and gives you the difference in cash.
LTV (loan-to-value): your loan balance divided by the home’s appraised value.
Seasoning: the waiting period on a loan or on title before you can refinance.
Limited cash-out refinance: a rate-and-term refinance with only incidental cash back.
Draw: a staged release of renovation money after inspected work.
Funding fee: a VA charge that may apply at closing, with some borrowers exempt.
How Do You Find the Best Program for Your Situation?
Start by gathering your current mortgage statement, a rough project budget, and your occupancy picture. Then compare the programs against your equity. Lendmire’s cash-out refinance programs page outlines how the wholesale options work.
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. Lendmire is a mortgage broker, not a lender, and every program is subject to lender guidelines and full file review.
Frequently Asked Questions
Can I use cash-out refinance money for any renovation?
Yes on a standard cash-out. Freddie Mac places no restrictions on how proceeds are used. Renovation products are different: they require permanent improvements, a budget, and a contractor agreement, and they release funds in stages.
Can an FHA Streamline or VA IRRRL pay for home improvements?
No, not as a source of project cash. The FHA Streamline refinances an existing FHA loan with no cash out. The IRRRL is VA-to-VA with no cash to you. A VA cash-out is the VA route for improvement money.
Is a cash-out refinance cheaper than a HELOC?
It depends on your existing mortgage and project size. If your current loan is better than what’s available now, a second loan may cost less. If you were going to refinance anyway, one loan can be simpler.
How much equity do I need to keep?
On a conventional one-unit primary home, you keep at least 20%, since the cap is 80% LTV. FHA also caps at 80%, including any second lien. Other occupancies are capped lower, subject to lender guidelines.
Do I have to wait before a cash-out refinance?
Usually, yes. The loan being paid off must be at least 12 months old, and a borrower must have been on title for six months. Renovation loans and special-purpose cash-outs are exempt from Freddie’s loan-age rule.
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 serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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. Freddie Mac Seller/Servicer Guide 4301.5
2. Fannie Mae HomeStyle Renovation product sheet
3. Freddie Mac Bulletin on seasoning exemptions
4. HUD
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 Apply for a Cash-Out Refinance on Your Primary Home · Cash-Out Refinance vs Home Equity Loan When You Need Full Value · Delayed Financing vs. a Traditional Cash-Out Refinance for a Cash Buyer
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.