The Quick Read: Usually yes. A cash-out refinance costs more than a plain rate-and-term refinance because it is priced on a costlier grid, requires more equity, and needs a new appraisal. The biggest gap is usually the pricing built into the loan, not the closing-cost line items. The cost depends on credit score, equity, and what the alternative is, and every figure is subject to lender guidelines and full file review.
What Is the Difference Between the Two Loans?
A plain refinance, which the agencies call a limited cash-out refinance, replaces your current first mortgage and pays the closing costs. Only incidental cash comes back. A cash-out refinance replaces the loan and also puts a lump sum in your hands, borrowed against your equity.
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: 7.40% as of October 15, 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.
The loan purpose sets the category, not your intent. Fannie Mae’s rules for a limited cash-out refinance allow only liens used to buy the home to be paid off and rolled in. Pay off a HELOC that funded a kitchen or a car, and the file becomes a cash-out loan, even if no check comes back to you. A free-and-clear home works the same way: any new mortgage on it is treated as cash-out.
Where Does the Extra Cost Show Up?
It shows up in four places: pricing, equity cushion, process, and lifetime cost. Most of the fee items on the Loan Estimate look the same on both loans. The difference sits underneath them.
| Cost layer | Plain refinance | Cash-out refinance |
|---|---|---|
| Pricing built into the loan | Lower-cost grid | Separate, costlier grid |
| Equity required | Higher leverage allowed | Much more equity kept |
| Appraisal | Often needed, waived on some streamlines | New appraisal required |
| Balance | Pays off the old loan | Larger loan, more interest over time |
Pricing is the biggest piece
Pricing adjustments are set by loan purpose, credit score, and loan-to-value. Cash-out sits on a costlier grid than limited cash-out or rate-and-term, and Fannie’s cash-out refinance rules say those adjustments are added on top of any others.
Here’s the catch. These charges rarely appear as their own line item. Lenders usually build them into the interest rate or into points. A borrower comparing two Loan Estimates sees a different rate, not a labeled “cash-out fee.” That is why the closing-cost lines can look nearly identical while the loans cost different amounts.
The equity cushion is smaller
Leverage is where the loan types separate most clearly. Across the wholesale programs Lendmire works with, a refinance on a one-unit primary residence reaches 95% loan-to-value, and up to 97% where the existing loan is agency-owned and the first-time-buyer program allows it. A conventional cash-out on the same home stops at 80%. On two- to four-unit primary residences, second homes, and investment property, cash-out is capped at 75%.
Fannie Mae’s published eligibility matrix follows the same pattern: far more equity stays in the home with cash-out. A smaller cushion is exactly why lenders price the loan higher.
The appraisal is not optional
The FHA Streamline and VA streamline refinance generally skip the appraisal. Value sets the loan-to-value limit, so on a cash-out the appraisal can change how much you can borrow.
Closing costs scale with the balance
Title, appraisal, and lender charges are the same kinds of fees on both loans. But percentage-based items grow with a larger loan. You pay more mostly because the balance is bigger, not because the fee list is longer.
What Does Not Change?
Most of the fee types are identical. Both loans carry title work, recording charges, an appraisal in most cases, and prepaid items like escrow deposits. If a quote shows dramatically different third-party fees between the two, ask why. The honest difference is pricing and loan size.
When Is Cash-Out Not More Expensive?
Several cases break the “cash-out costs more” rule, or flip its direction.
Student loan cash-out. Fannie Mae waives the loan-level price adjustment for loans that meet its student loan cash-out requirements, per its cash-out guidance. That is a named exception.
High-balance debt payoff. The CFPB found that paying off other debts was the most common reason borrowers took cash out, with home repairs second. Where the debt carries a very high cost and the horizon is short, the math can favor cash-out. That math belongs on a worksheet with your actual numbers.
Strong credit and low leverage. The pricing grid moves with credit score and loan-to-value. A borrower with strong credit who borrows well under the cap pays a smaller adjustment than one near the limit. Pricing varies by borrower and loan scenario.
A wholesale lane with no mortgage insurance. Among the programs Lendmire’s network places, one conventional cash-out lane reaches 89.99% loan-to-value with no mortgage insurance. That is the exception to the 80% conventional cash-out cap above. It is limited to a thirty-year fixed on a primary residence, requires a 680 score, a 50% ratio ceiling, and a conforming balance, and carries its own six months of seasoning. It is not written on Texas homesteads, where the state constitution caps cash-out at the agency figure. Subject to lender guidelines.
Lower alternatives. A second lien or HELOC may cost less than refinancing the whole first mortgage, especially when the current first mortgage is one you want to keep. Lendmire’s piece How a Cash-Out Refinance Can Cost Less Than a HELOC for a Recent Buyer walks through that comparison.
How Do FHA and VA Loans Compare?
Government loans work differently, and the conventional price grid does not apply to them.
The FHA Streamline is for existing FHA loans that are current. HUD’s streamline page says cash above $500 may not be taken out, closing costs may not be financed into the new mortgage amount, and the refinance must show a net tangible benefit. HUD also notes that “no cost” refinances work by charging a higher rate. If you want cash from an FHA loan, you need a full FHA rate-and-term or cash-out with an appraisal.
The VA side is where the fee schedule shows the difference between loan types. The VA funding fee schedule lists 0.5% for the IRRRL, 2.15% for a first-use cash-out, and 3.3% for subsequent-use cash-out, for loans closing on or after April 7, 2023 and before November 14, 2031. Veterans exempt because of a service-connected disability are not charged the funding fee. The IRRRL requires an existing VA loan, no VA appraisal, a net tangible benefit, and seasoning of the later of 210 days and six payments.
What Does a Borrower Have to Qualify For?
Cash-out has more gates than a plain refinance. On the wholesale conventional programs:
- The first mortgage being paid off must be at least 12 months old, measured note date to note date.
- A borrower must have been on title for 6 months, with exceptions for delayed financing, inheritance, and legal awards.
- On a primary residence, all borrowers must occupy the home.
- Credit and ratio floors apply: wholesale conventional programs start at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%.
Seasoning is the item that gets files kicked back. A recent purchase often cannot be refinanced for cash until the 12-month and 6-month clocks run, and files that assume them away stall.
How Do You Compare the Two on a Loan Estimate?
Check these points:
1. Loan amount. Confirm the cash-out loan equals the old payoff plus costs plus the cash you want. A bigger balance is the base for everything else.
2. Cash to close. Make sure the cash to close and monthly payment match what you were quoted.
3. Rate and points. This is where the pricing grid hides. A higher rate or more points on the cash-out quote, with similar fee lines, is the adjustment at work.
4. Costs financed. The CFPB explains that rolling costs into the loan lowers upfront cost but adds interest over time. Rolled-in costs also count against the loan-to-value cap, so they reduce the cash you can take.
5. Term. A new loan resets the term. Even at a similar rate, a longer remaining term means more lifetime interest.
One more point: if your current rate is already low, the real cost of replacing it is much higher than the gap between two quotes suggests. You give up the whole existing loan, not just the extra cash.
Is a “No Closing Cost” Cash-Out Free?
No. The CFPB says these costs are paid either through a lender credit with a higher interest rate or through a larger loan balance. The cost moves to a different line. Streamline works the same way: an FDIC-hosted FHA streamline summary says “streamline” describes the documentation, not a cost-free loan.
How Can You Lower the Cost?
- Borrow less. A smaller loan-to-value usually means a smaller pricing adjustment.
- Improve your credit score before applying, since the grid moves with it.
- Take only the cash you need. Every extra dollar borrowed carries interest for the full term.
- Compare against keeping your first mortgage and using a second lien or HELOC.
- Ask your broker to show the cash-out and rate-and-term quotes side by side.
The CFPB also flags a risk. Its research on cash-out refinances notes that converting card or auto debt into mortgage debt secured by the home can raise foreclosure risk if payments become unsustainable. Missing a card payment is unlikely to cost you the house. Missing a mortgage payment can.
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
Rate-and-term refinance: A new loan that replaces your current first mortgage, with only incidental cash back. Agencies call it a limited cash-out refinance.
Cash-out refinance: A new, larger loan that pays off the old one and gives you the difference in cash.
Loan-level price adjustment (LLPA): A pricing adjustment added to a loan based on risk factors. It depends on loan purpose, credit score, and loan-to-value, and usually shows up in the rate or points.
Loan-to-value (LTV): The loan balance divided by the appraised value of the home.
Seasoning: The time you must have held the home or the existing loan before the lender allows a cash-out.
Net tangible benefit: The test on FHA and VA streamlines that the refinance must improve your position in a measurable way.
Frequently Asked Questions
Is the interest rate always higher on a cash-out refinance?
Usually, but not in every case. Cash-out is priced on a costlier grid, and the adjustment moves with credit score and loan-to-value. A borrower with strong credit who borrows well below the 80% cap pays less of a premium than one near the limit.
Do I pay more in closing costs on a cash-out?
Mostly because of loan size. Title, appraisal, and lender charges are the same kinds of fees on both loans, but percentage-based items rise with a larger balance. The bigger cost difference is the pricing built into the rate or points, not the fee lines.
If I pay off my HELOC, is it still a plain refinance?
Only if the HELOC was used to buy the home. Paying off a second lien that funded anything else makes the loan a cash-out under the agency rules, even if no cash comes back to you.
Why does cash-out need more equity?
A thinner equity cushion is more risk for the lender. On a one-unit primary residence, the standard conventional cash-out cap is 80% loan-to-value, against 95% for a rate-and-term refinance. Two- to four-unit homes, second homes, and investment property are capped at 75%. Subject to lender guidelines.
Is a VA cash-out more expensive than an IRRRL?
Generally, a VA cash-out carries a higher funding fee than an IRRRL, which is a separate consideration from how either loan is structured. Veterans with a service-connected disability exemption pay no funding fee. An IRRRL also requires an existing VA loan and gives no cash back.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the cash-out refinance programs and the equity each one reaches, or you can request a scenario review.
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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References
1. Fannie Mae Selling Guide: Limited Cash-Out Refinance Transactions
2. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
3. Fannie Mae Eligibility Matrix
4. CFPB press release: cash-out refinance borrowers
5. HUD: Streamline Refinance Your Mortgage
6. CFPB: Closing disclosure explainer
7. CFPB: Get to know loan costs
8. FDIC
9. CFPB: Cash-Out Refinances and Paydown Behavior
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-Out Refinance for Homeowners Choosing How to Use the Cash · How to Get Matched With a Broker for a Cash-Out Refinance · Does a Cash-Out Refinance Cost More Than Refinancing for Better Terms?
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
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- 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.