The Quick Read: A higher home value gives you more equity to borrow against, but it does not remove the rules. On a conventional loan for a one-unit home you live in, the new loan can reach 80% of the appraised value, so at least 20% stays in the house. You also have to clear a waiting period on your current loan and pass the usual credit, income and appraisal checks. Subject to lender guidelines and full file review, that is the whole game.
What You Need to Know First
- The cap is on value, not on how much your home grew. The new loan tops out at 80% of the appraised value on a one-unit primary residence.
- Your cash is what’s left after the payoff. The old mortgage, any liens that must be paid, and financed costs all come out first.
- Waiting periods don’t care about appreciation. The loan you’re paying off generally must be at least 12 months old.
- The appraisal sets the number. A low appraisal shrinks the loan directly.
- You replace your first mortgage. That is the trade-off against a HELOC (a home equity line of credit), which leaves it in place.
What Is a Conventional Cash-Out Refinance?
It is a new first mortgage that pays off your current one and hands you the difference in cash. Lendmire’s cash-out refinance programs are arranged through wholesale lenders.
Here is how it differs from a plain refinance. A rate-and-term refinance swaps your loan and leaves only incidental cash. A cash-out is a larger loan, sized to the equity you’ve built.
A jump in value matters because it does two things at once. It raises the ceiling on what you can borrow. It also lowers your loan-to-value ratio, which can help your file.
Key Terms Defined
Equity: the part of your home’s value you own, meaning value minus what you owe.
LTV (loan-to-value): your loan balance divided by the home’s appraised value, shown as a percentage.
CLTV (combined LTV): the same math, but it counts every loan secured by the home, including a second lien or HELOC that stays in place.
Seasoning: how long you’ve held the loan or the title before a lender will let you refinance it.
Net proceeds: the cash left after the old loan, other required payoffs and financed costs come out of the new loan.
How Much of the Jump Can You Actually Use?
Not all of it. Conventional cash-out on a one-unit home you live in is capped at 80% LTV. Two- to four-unit homes you live in, second homes and investment properties cap at 75%. Occupancy and unit count decide the leverage, and that is all this article will say about rentals. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The agencies publish the same caps. See the Fannie Mae Eligibility Matrix for the grid. The 80% figure also counts a second lien that stays in place, because the limit applies to total debt against the home.
Here is the math, in order, using percentages of value instead of dollars:
| Step | What you do | Example (as % of value) |
|---|---|---|
| 1 | Start with the appraised value | 100% |
| 2 | Apply the cap | 80% maximum new loan |
| 3 | Subtract your first-mortgage payoff | Say you owe 45% |
| 4 | Subtract liens that must be paid | Say 0% |
| 5 | Subtract financed costs and prepaids | Say 3% |
| 6 | What’s left is your cash | About 32% of value |
Those percentages are modeled assumptions, not a quote. Plug in your own payoff and the pattern holds.
Now the wry part. The ceiling is a ceiling, not a target. Many homeowners find the right number sits well below it.
Does Your Timeline Clear Seasoning?
A jump in value does not shorten the clock. The loan you’re paying off must be at least 12 months old, measured from note date to note date. At least one borrower must also have been on title for six months. These are agency rules, and the Fannie Mae Selling Guide’s cash-out section lays them out.
For someone who bought with a mortgage, the 12-month loan age is usually the longer clock. The six-month title test mostly matters for cash buyers.
Say you bought a year and a half ago and prices have since surged. You pass both tests. Now say you bought five months ago. You don’t, with one named exception covered below.
How Is the Loan Underwritten, Step by Step?
Underwriting is the lender’s review of your credit, income, assets and the property. Here is the sequence.
1. Estimate your equity. Use recent sales nearby and your latest mortgage statement. An online estimate is a starting point only, not an appraisal.
2. Check seasoning. Pull the note date on your current first mortgage and the date you took title.
3. Gather documents. Expect income, asset and ID paperwork, plus your current mortgage statement.
4. Run the file. The lender runs it through the agencies’ automated systems. Across the wholesale programs Lendmire places files with, conventional loans start at a 620 decision score, and the automated finding governs most files with a total debt-to-income ceiling of 50%. Your score and LTV also drive cash-out pricing, which rises as the score falls and the LTV climbs.
5. Order the appraisal. More on this below.
6. Review disclosures. You’ll get a Loan Estimate, then a Closing Disclosure, so you can compare the terms line by line.
7. Close and pay off. The old lender is paid first. You receive what remains.
One more underwriting detail. On automated files with a debt-to-income ratio above 45%, the agency requires six months of reserves. Reserves are savings left over after closing.
How Do You Prove the Jump Is Real?
With an appraisal. For most cash-out loans, that’s the default way to set value. Some files get an appraisal waiver offered through the automated system, where the lender’s submitted value is accepted. Fannie Mae’s value acceptance page explains it. A waiver may be offered on some files. It is not guaranteed, and a lender can still order an appraisal if it has reason to.
Don’t count on a waiver when you plan your cash.
What If the Appraisal Comes in Low?
Then your maximum loan shrinks by 80% of the shortfall. A drop in value of 5% takes 4% of value off the loan ceiling. Not ideal.
You have a few moves:
- Resize the loan. Take less cash. If your need is flexible, this is the simplest path.
- Send comparable sales. If the appraiser missed recent nearby sales or improvements, your loan officer can ask for a review with that evidence. A review is a request, not a promise.
- Pause. If the gap is large, waiting for more sales to post is a legitimate choice.
- Switch the plan. A HELOC is sized differently, and it may fit if you want to keep your current first mortgage.
The lesson: treat your pre-application estimate as a range, not a number.
Where the General Rule Bends
The 80% and 12-month rules cover most files. A handful of named exceptions and blockers change the picture.
Delayed financing. If you bought with cash within the past six months, Fannie Mae lets you take cash out under conditions. The new loan is limited to your documented initial investment plus financed costs, subject to the max LTV on current value. It is still priced as cash-out. The Selling Guide page lists the requirements.
Inheritance or legal award. The six-month title test has exceptions for property you inherited or were legally awarded. Confirm the current wording with your loan officer, since agencies update these pages.
Co-owner buyout. The agencies carve out buyouts from the 12-month loan-age test. If you’re buying out a former spouse or partner, ask whether that lane fits.
Student loan cash-out. Fannie Mae has a feature that pays off student loans through the refinance and waives the cash-out price adjustment when its requirements are met. The archived Selling Guide version describes it. That page is dated, so confirm the current terms.
Transactions that don’t qualify. The same guide lists ineligible uses, including loans paying off an installment land contract and loans with a temporary interest rate buydown.
A listed home. If your property is on the market, it must come off before the loan funds. Lendmire’s piece Conventional Cash-Out Refinance Rules After Listing Your Home for Sale walks through that sequence.
Loan size. Your new balance must stay within the conforming loan limit for your county. The limit is set annually, so check the current figure for your area. Go past it and you’re in jumbo territory, which is a different program.
A higher-leverage lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance and its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so that lane isn’t written there. Everything here is subject to lender guidelines and full file review.
Cash-Out, HELOC, or Keep What You Have?
This is the decision most pages skip. A cash-out replaces your first mortgage. A HELOC or home equity loan sits behind it and leaves it in place, a distinction the CFPB draws clearly.
| Factor | Cash-out refinance | HELOC / equity loan | Keep current loan |
|---|---|---|---|
| First mortgage | Replaced | Stays | Stays |
| Terms on old loan | Reset | Preserved | Preserved |
| Lump sum | Yes | Loan yes; HELOC draws | None |
| Fits when | You want one loan | Existing terms are valuable | You don’t need cash |
Here’s the honest tradeoff. If your current first mortgage has terms you like, a cash-out gives them up. If your current terms are weak anyway, replacing it can be a clean fix. This one is a genuine toss-up that depends on your numbers.
How Much Should You Take?
Take what the purpose needs, plus a cushion for closing costs. Then stop.
Why not the max? The new loan is larger, and the CFPB notes your monthly payment may rise and your payoff time may stretch. The same agency’s research finds paying non-mortgage debts with mortgage debt can raise foreclosure risk.
Before you apply, test the budget:
- Add the new larger balance to your monthly picture, including taxes and insurance.
- Ask whether you’d still be comfortable if your income dipped.
- Consider what a later drop in value would do. Equity you’ve spent doesn’t come back.
Mortgage insurance isn’t a factor at 80% LTV, since it applies above that. Closing costs can be paid in cash or financed into the loan within the cap, and financed costs reduce your net cash. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Your Next Step
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. Another piece may help if you’re thinking ahead: can you sell your home after a cash-out refinance?.
Frequently Asked Questions
Can I do a cash-out refinance right after my home value jumps?
Only if the loan you’re paying off is at least 12 months old and you’ve held title for six months, with narrow exceptions. A jump in value raises your borrowing ceiling but doesn’t shorten either clock.
How much of my new equity can I take?
On a one-unit home you live in, the new loan can reach 80% of the appraised value. Your cash is that amount minus the payoff, required liens and financed costs. Two- to four-unit homes you live in, and second homes, cap at 75%.
Do I need an appraisal?
Usually yes. An appraisal waiver may be offered on some files, but it isn’t guaranteed. If the appraisal comes in low, the maximum loan drops with it.
Does a cash-out refinance cost more than a regular refinance?
It is priced higher, because cash-out loans carry price adjustments that rise with LTV and lower credit scores. Your Loan Estimate shows the full terms for comparison.
Is a HELOC a better choice?
It depends. A HELOC keeps your existing first mortgage intact, which matters if those terms are good. A cash-out gives you one loan, but it replaces the old one.
For your own numbers, request a scenario review with Lendmire.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Value Acceptance
4. Fannie Mae Selling Guide B2-1.3-03 (archived 02/01/2023 version)
5. CFPB, a look at cash-out refinance mortgages and their borrowers
6. CFPB older Americans housing guide (using home equity)
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use a Conventional Cash-Out Refinance on a Paid-Off Home? · Can You Do a Conventional Cash-Out Refinance Without a Mortgage? · Should You Take a Conventional Cash-Out Refinance on Your Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.