The Quick Read: Yes, usually. Having a conventional loan does not block you, because a conventional cash-out refinance simply replaces your current mortgage with a larger one and hands you the difference. What decides the outcome is timing, occupancy, how much equity you keep, and your credit, income and reserves. Across the wholesale programs Lendmire places files with, the standard cap is 80% loan-to-value on a one-unit home you live in, and the first mortgage being paid off must be at least 12 months old.
What Does a Cash-Out Refinance Actually Do to Your Loan?
A cash-out refinance pays off your current first mortgage with a brand-new, larger first mortgage. You receive the difference in cash. The new loan has its own rate, term and payment, and those apply to the whole balance, not only the cash portion.
Loan-to-value (LTV) is the new loan amount divided by your home’s appraised value. The appraisal sets the ceiling, which is why a low appraisal can shrink the cash you receive.
Both agency rulebooks treat this as a standard, named transaction. The Fannie Mae Selling Guide allows the new loan to pay off the existing first mortgage, finance closing costs and prepaid items, pay off subordinate liens of any age, and put equity in your hands for any purpose.
Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders rather than lending directly. If you’re comparing programs, Lendmire’s cash-out refinance programs page lays out the options side by side.
What Are the Two Seasoning Clocks?
Seasoning is the waiting period a lender wants before you can do a cash-out. There are two separate clocks, and people blur them together. Both must be satisfied.
Clock one: time on title. At least one borrower must have been on the property’s title for six months before the new loan is disbursed. Fannie Mae’s announcement of the change lists the ownership exceptions.
Clock two: age of the loan being paid off. If you’re paying off a first mortgage, it must be at least 12 months old, counted from the note date of the old loan to the note date of the new one. Fannie Mae added this rule for note dates on and after April 1, 2023.
The plain-English takeaway: you can’t do a cash-out a few months after a prior refinance or a purchase loan. That includes the case where your current loan was itself a recent refinance. The 12 months run from that refinance’s note date, not from when you first bought the home.
| Clock | What it measures | Minimum |
|---|---|---|
| Title seasoning | Time a borrower has been on title | 6 months |
| Loan seasoning | Age of the first mortgage being paid off | 12 months |
Yes, it’s two clocks. Plenty of borrowers clear one and trip the other.
Are There Exceptions to the Six-Month Rule?
Yes. The six-month title rule has named exceptions: delayed financing, inheritance and legal awards. These cover situations where you didn’t use a mortgage to get the property or came into it by court order or inheritance.
Delayed financing is the one most buyers ask about. Say you paid cash for a home and now want your money back out. Fannie Mae allows a cash-out soon after purchase if the original purchase was arm’s-length and documented, and the borrower meets other conditions. Exact requirements change, so the lender reviews the current Selling Guide against your file.
Other edge cases follow the same logic:
- Leasehold and co-op. The clock runs from when you became lessee on the ground lease or first held the co-op shares.
- Paid-off homes. A home with no mortgage still counts as a cash-out. Both agencies have specific language for it, so don’t expect it to be treated as a simpler transaction.
Some states also have special rules for cash-out on a homestead. Texas is one example, and Lendmire’s wholesale lane with the highest leverage isn’t written there. Ask whether your state changes the picture.
How Much Equity Can You Take Out?
On a one-unit home you live in, conventional cash-out tops out at 80% LTV. On a two- to four-unit principal residence, the cap is 75%. The Fannie Mae Eligibility Matrix publishes these caps, and they’re the same figures we work to every week. Second homes and investment property also sit at 75%. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
So you can’t borrow 100% of your equity. You leave a cushion. The CFPB’s guide to using home equity says lenders typically require you to keep a share of your home’s value as equity.
Here’s a scenario without dollar figures. Picture a one-unit home you live in, appraised at a value where your current balance is 50% of it. At the 80% cap, the new loan could go up to 80% of that value, so roughly 30 points of value could come back as cash before costs. Closing costs and any liens you pay off come out of that same room.
One wholesale lane reaches 89.99% LTV with no mortgage insurance on a thirty-year fixed. It requires a 680 score, a 50% ratio, a primary residence, a conforming balance, and its own six months of seasoning. Not every file fits it, and it isn’t offered everywhere. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
What Credit, Income and Reserves Do You Need?
The wholesale conventional programs start at a 620 decision score, and the automated underwriting finding governs most files. The total debt-to-income (DTI) ceiling is 50% on an automated approval. DTI is your monthly debts divided by your monthly gross income.
Manually underwritten loans use tighter ratio limits of 36% or 45%, with reserve and score factors from the Eligibility Matrix. Reserves are the savings you hold after closing. On cash-out loans run through Fannie Mae’s automated system, minimum reserves apply when DTI is above 45%.
Some lenders set a higher credit floor than the agency minimum. That’s an overlay, and it varies by lender, which is one reason a broker shops more than one.
Past credit events carry agency waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
What Does It Cost, and What Changes in Your Budget?
Closing costs apply, as with any refinance. Among them are loan-level price adjustments, which are risk-based upfront fees tied to credit score, loan purpose, occupancy, number of units and similar factors, and they stack. Cash-out carries an extra adjustment compared with a plain rate-and-term refinance. The live matrix has the current figures, so none are quoted here.
Mortgage insurance is the other piece. It’s required above 80% LTV, and since the standard cash-out cap is 80%, most standard cash-outs don’t carry it. If you’re ever above 80%, the borrower can request cancellation at 80% of original value, and the servicer must end it automatically at 78%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Then there’s the budget. The new loan resets the term and applies to the entire balance. A bigger balance, and sometimes a longer term, can raise your payment. A CFPB study of refinances, summarized by Consumer Finance Monitor, found cash-out loans tended to have a longer term and a larger monthly payment than the mortgage they replaced.
A “no-closing-cost” refinance doesn’t remove those costs. They get built into the rate or the balance. Ask for the Loan Estimate and compare the full terms.
Is a Cash-Out Refinance the Right Tool?
It depends on what you’d give up and what you’re trying to do. Three comparisons cover most decisions.
| Option | First mortgage | Best when |
|---|---|---|
| Cash-out refinance | Replaced | Your current terms aren’t worth keeping |
| HELOC or home equity loan | Left in place | You’d lose a low existing rate |
| Rate-and-term refinance | Replaced, only incidental cash | You want new terms, not cash |
Keeping a low-rate first mortgage is the usual reason to skip a cash-out. A home equity loan or HELOC leaves it untouched. The trade-off is a second payment and, with a HELOC, a variable structure.
If your current loan is FHA or VA, the question changes. A conventional cash-out can pay off an FHA loan. Lendmire’s piece Cash-Out Refinance With an Existing FHA Loan: Stay FHA or Switch to Conventional? walks through that choice. FHA Streamline and the VA IRRRL are separate products, and neither is a cash-out.
If a HELOC already sits behind your first mortgage, a conventional cash-out can pay it off. Lendmire’s guide How to Pay Off an Existing HELOC With a Conventional Cash-Out Refinance covers that case.
Then there’s the risk side. Using cash-out to pay off credit cards or other unsecured debt turns it into debt secured by your home. The CFPB warns that this can put the home at risk of foreclosure if payments become unsustainable. Missing payments on unsecured debt is unlikely to cost you the house. Cash-out also uses up equity you may want later.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What Gets Applications Stalled or Denied?
Most stalls trace to a short list. Here’s how each one looks and what to do.
- Seasoning. The loan being paid off is under 12 months old, or no borrower has six months on title. Wait it out, or check whether an exception applies.
- Low appraisal. A lower value cuts the maximum loan. Cash proceeds shrink, or the deal no longer works at the cap.
- Occupancy. On a primary-residence cash-out, every borrower must occupy the home. Second homes and investment property have lower leverage caps.
- High DTI. Above 45%, reserves come into play. Above 50%, an automated approval is unlikely.
- Loan size. The loan has to fit under the conforming limit, which FHFA sets each year and raises in high-cost areas. Check FHFA’s current-year limit for your county. Above it, jumbo programs take over.
- Ineligible features. Some transactions are off the table at Fannie Mae, such as a temporary rate buydown or paying off an installment land contract.
A quick self-check before you apply: Is your current first mortgage at least 12 months old? Has a borrower been on title six months? Will you live in the home? Is the new balance at or under 80% of value on a one-unit home? If you can answer yes to all four, you’re likely past the first hurdles.
Key Terms Defined
Cash-out refinance: A new, larger first mortgage that pays off the old one and gives you the difference in cash.
Seasoning: The waiting period required before you can refinance, measured by time on title and by the age of the loan being paid off.
Loan-to-value (LTV): The new loan balance divided by the home’s appraised value.
Debt-to-income (DTI): Your total monthly debt payments divided by your gross monthly income.
Note date: The date you sign the mortgage note, which is how both seasoning clocks are measured.
Frequently Asked Questions
How soon after buying a home can you cash-out refinance?
Six months on title, in most cases, and the loan being paid off must be at least 12 months old. If you bought with cash, delayed financing may let you take cash out sooner, subject to documentation and lender guidelines. If you bought with a mortgage, the 12-month loan clock applies.
Does a cash-out refinance replace my whole mortgage?
Yes. The new loan pays off the old first mortgage entirely, so the new rate, term and payment apply to the full balance. A HELOC or home equity loan is different, because it leaves your first mortgage in place and adds a second loan.
Can you cash-out refinance a paid-off home?
Yes. A home with no mortgage still counts as a cash-out refinance, and both agencies address it specifically. The same 80% cap applies on a one-unit home you live in, and the six-month title rule applies, subject to its exceptions.
Do you have to live in the home?
For a primary-residence cash-out, all borrowers must occupy the property. Second homes and investment properties follow different rules and sit at lower leverage, at 75% on the programs we work with. Occupancy is one of the first things a lender checks.
Will a cash-out refinance hurt my credit?
Not necessarily. A CFPB review of cash-out borrowers found an initial sharp score improvement, followed by a gradual decline, though scores stayed above their pre-refinance levels. Credit still matters for approval, and the application itself involves a credit check.
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.
Whatever you decide, the clocks and the 80% cap are the two numbers to check first, because they settle most of these questions before any paperwork starts.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Selling Guide Announcement SEL-2023-01
3. Fannie Mae Eligibility Matrix
4. CFPB, Using Home Equity to Meet Financial Needs
5. Fannie Mae Eligibility Matrix (media copy)
6. Consumer Finance Monitor summary of CFPB 2013-2023 study
7. CFPB Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
8. FHFA, 2026 Conforming Loan Limit Values
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Buy Out a Divorcing Spouse With a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance Requirements for a Clean File · Can You Get a Conventional Cash-Out Refinance on a Vacation Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.