The Quick Read: The loan size comes from three limits. The first is a value-based cap. The second is what is left after your old mortgage and closing costs are paid. The third is what the project needs. You borrow the smallest of the three, and the cap is a ceiling, not a target. Condos add a fourth check, because the lender reviews the building as well as your unit.
Key Takeaways
- Start with the contractor bid, not the maximum. Add a cushion for overruns and closing costs, then see whether the cap allows it.
- A conventional cash-out refinance on a one-unit primary residence reaches 80% of value, subject to lender guidelines. Two- to four-unit homes, second homes and investment property reach 75%.
- Your existing first mortgage is paid off from the new loan first. Only the leftover equity becomes renovation cash.
- Condo work financed through a renovation loan is generally limited to the interior of your unit, and the HOA has to allow it.
- The FHA Streamline and VA IRRRL cannot fund renovation cash. They are the wrong tool here.
What Sizing a Cash-Out Refinance Means
A cash-out refinance replaces your current mortgage with a larger one. The new loan pays off the old balance. You receive the difference in cash.
That is the key difference from a home equity loan or HELOC (a home equity line of credit). Those add a second loan on top of your first one. A cash-out refinance swaps the whole debt, so the new balance, term and note terms apply to everything you owe, not just the cash you pulled.
Sizing means working out how large that new loan should be. Most borrowers ask “how much can I take out?” The better question is “how much does this project need, and does the cap allow it?”
Lendmire’s cash-out refinance programs are arranged through wholesale lenders. On the conventional side, the formula is the same whichever lender you end up with.
The Sizing Formula, Step by Step
Work through these steps in order.
1. Pick the loan type. A plain cash-out refinance gives you cash to spend however you like. A limited cash-out refinance only pays off the first mortgage and allows small incidental cash back. A renovation refinance builds the work money into the loan and releases it in stages.
2. Find the value. A plain cash-out loan is sized off today’s appraised value. A renovation loan is sized off the “as-completed” value, a projected figure assuming the plans are finished.
3. Apply the cap. Value times the leverage limit gives the maximum loan. For a conventional cash-out on a one-unit primary residence, that limit is 80% LTV. LTV, or loan-to-value, is the loan balance divided by the property’s value.
4. Subtract the payoff. Your current first mortgage comes out first. So does any HELOC or second lien you want to clear.
5. Subtract closing costs. Costs rolled into the loan eat room under the cap. Costs you pay in cash come out of your pocket instead.
6. Read what remains. That is the most renovation cash the loan can produce.
7. Compare it to the project. If the leftover exceeds the project, borrow less. If it falls short, you have a decision to make (more on that below). Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Cash-out refinances also carry waiting periods. Under Fannie Mae’s cash-out guidelines, the first mortgage being paid off must be at least 12 months old. At least one borrower must also have been on title for six months. Exceptions exist for inheritance, court-awarded property, and certain co-owner buyouts. Check your note date and title date before you plan anything.
A Worked Example (In Percentages, Not Dollars)
Here is a modeled example. Every input is an assumption, not a market figure or a program term. Treat the condo’s appraised value as 100 units.
| Line | Modeled amount |
|---|---|
| Value-based cap (80% LTV) | 80 |
| Existing mortgage payoff | 55 |
| Closing costs rolled in (assumed) | 3 |
| Left for renovation | 22 |
| Contractor bid (assumed) | 20 |
| Bid plus 10% contingency | 22 |
In this case, the cap leaves exactly enough room for the bid plus a 10% cushion. There is no slack. If the appraisal comes in a few points lower, the cushion disappears first.
Now run it the other way. Say the real project is only 12 units. Then you borrow enough to cover the payoff, closing costs and the 12-unit bid plus contingency. That lands well below the cap, with room to spare. The loan is smaller, the balance is smaller, and your cushion against a low appraisal is larger.
This is the habit that serves borrowers best. Solve from the project up, then check it against the cap.
Why Condos Change the Math
A condo is a unit plus a share of a building. The lender approves both.
The project has to be eligible. For conventional loans, lenders review the HOA’s finances. They look at reserves, how many owners are behind on dues, owner-occupancy levels, litigation and the condition of the building. A weak project can block the loan even when your unit and your credit are strong.
Some projects skip the full review. Fannie Mae’s project review waiver rules waive the full review for detached condo units and for units in small two- to four-unit projects. Both still have to meet basic property eligibility. Certain Fannie-to-Fannie limited cash-out refinances also qualify for a waiver. A cash-out that pulls renovation money does not fit that waiver, so plan on a normal review unless your building is small.
Safety and repair reviews apply to larger buildings. For bigger projects, lenders may need recent inspection reports and a look at any critical repairs or evacuation orders. If the lender cannot get that information, the project may not be eligible.
The unit is appraised alone. The appraiser values your unit using sales of comparable units, ideally in your own building. Interior upgrades count only to the extent buyers in your building pay for them. An ultra-custom kitchen in a building of standard units may not earn its full cost back in value.
Dues stay in the picture. HOA dues count toward your monthly housing expense. A special assessment for building-wide work can also strain your ratios and your reserves.
Plain Cash-Out vs. Renovation Loan vs. Second Lien
Three paths can fund condo work. They behave differently.
| Factor | Plain cash-out refinance | Renovation refinance | Second lien or HELOC |
|---|---|---|---|
| Sized off | Current appraised value | As-completed value | Value minus first mortgage |
| Your first mortgage | Paid off and replaced | Paid off and replaced | Stays in place |
| How money arrives | Lump sum at closing | Held, released in draws | Lump sum or line |
| Condo work limits | None on how cash is used | Interior of unit, HOA approval | None on how cash is used |
| Best fit | Work you can pay for up front | Bigger projects tied to finished value | Smaller projects, keeping the first loan |
A plain cash-out is the simplest. The lender does not care how you spend the money, and you do not need contractor paperwork. But it values the unit as it stands today. If the project only pays off once finished, a plain cash-out may undersize the loan.
A renovation refinance counts the finished value. Fannie Mae’s HomeStyle Renovation product is the best-known example, and Freddie Mac has a counterpart called CHOICERenovation that also accepts condo units. Both are conventional loan products. Whether a given lender offers either one varies, so ask early.
How HomeStyle-Type Loans Work on a Condo
Fannie Mae’s guide says HomeStyle lets a borrower refinance and include repair funds in the same loan. It has no required improvement types and no minimum project amount. A maximum mortgage worksheet, Form 1035, sets the loan limit.
For condos, the rules are tighter. The work must be allowed by the HOA bylaws or approved in writing by the HOA. It must also stay inside the unit.
Two more points matter for sizing:
- No cash back. According to Fannie Mae’s HomeStyle product summary, a HomeStyle limited cash-out refinance does not let the borrower take cash at closing. That includes the small allowance a standard limited cash-out refinance normally permits. Renovation money and spending money are separate buckets.
- Draws, not a lump sum. The renovation funds are held and released in stages, usually after inspection. Your contractor’s payment schedule has to fit that process.
Typical paperwork for a renovation loan includes the appraisal, the contractor bid, plans, permits where required, and HOA approval. Your lender will give you the exact list.
The FHA 203(k) is the government-backed cousin. The FDIC’s summary of 203(k) says condo borrowers are limited to interior repairs on individual units in an FHA-approved project. FHA’s limits on cost, variants and consultants are specific, so get current figures from a lender before you plan around any of them.
Why the Streamline and IRRRL Don’t Fit
Two government refinance products come up often. The FHA Streamline and the VA IRRRL (Interest Rate Reduction Refinance Loan) exist to improve the terms of an existing government loan. They do not release equity.
Neither is built to fund renovation cash. In the VA’s own lender handbook, Chapter 3 of VA Pamphlet 26-7, cash to the veteran is generally not an eligible loan purpose. VA does have a separate cash-out refinance for owner-occupied homes. That is a different loan with its own rules.
Across the wholesale programs Lendmire places files with, the streamlines are the lowest-effort refinances. They skip a lot of paperwork. That is the reason they cannot do this job.
Stress-Test Before You Borrow the Maximum
The maximum is what the lender will allow. It is not what is wise. Run three checks.
1. The overrun check. Renovations run over. Many borrowers set contingency at around 10% of the bid, but the right number depends on the work. Older buildings with hidden plumbing or wiring tend to surprise people. If your cushion would leave you underfunded, scale back the scope.
2. The ratio check. Lenders compare your total monthly debts, including the new mortgage and HOA dues, to your income. That is your DTI, or debt-to-income ratio. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total-ratio ceiling of 50%. Higher ratios can also trigger reserve requirements. Subject to lender guidelines and full file review, a bigger loan means a bigger payment and less breathing room.
3. The reserves check. Reserves are the liquid savings left after closing. Keep enough to cover surprises, a rental gap if the unit is unlivable during work, and an HOA special assessment. If the new loan leaves you thin, borrow less.
One more cost rides along. Conventional loans above 80% LTV carry mortgage insurance. It can be cancelled at your request at 80% of the original value, and the servicer must end it automatically at 78%, as long as the conditions are met. One lane in the wholesale network reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio. That lane is for a thirty-year fixed on a primary residence at a conforming balance, with its own six months of seasoning. Ask whether it fits your file.
When the Math Falls Short
Sometimes the cap leaves less than the project needs. You have four moves.
- Scale the scope. Do the work that adds the most value to your unit first. In a condo, kitchen and bath updates often matter most to buyers, though your building’s comparable sales will tell you more.
- Phase the work. Fund phase one now. Revisit the refinance after the unit’s value rises and your balance falls.
- Switch products. A renovation loan sized off the finished value may reach further than a plain cash-out. A second lien can also work if keeping your current first mortgage matters to you.
- Wait out the seasoning. If you are inside the 12-month or six-month waiting period, a delay may open a cash-out that is blocked today.
If your loan balance sits above the conforming limit, jumbo programs take over.
Edge Cases That Break the Usual Rule
Second home or rental condo. Occupancy decides leverage. A cash-out on a second home or investment property reaches 75% LTV on the conventional side, not 80%. This article is written for the home you live in. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Co-owner buyout or inherited unit. The 12-month and six-month waiting periods carry exceptions, including a co-owner buyout under a legal agreement and property inherited or awarded in a divorce.
Building-wide work. If the HOA is replacing a roof or facade, renovation loans do not fund your share of the assessment. Those programs are for interior work on your unit.
Building in distress. A project with litigation, low reserves, heavy delinquencies or serious deferred repairs can derail the loan. Ask the HOA for its documents early.
Existing listing. If the condo was listed for sale, it must be off the market before the loan disburses.
Key Terms Defined
LTV (loan-to-value): The loan balance divided by the property’s value, shown as a percentage.
As-completed value: The appraiser’s estimate of what the unit would be worth once the planned work is finished.
Seasoning: A required waiting period, such as how long you have held title or how old your current mortgage is.
Limited cash-out refinance: A refinance that mostly replaces your current loan and allows only small incidental cash back.
Draw: A staged release of renovation money to your contractor, usually after an inspection.
DTI (debt-to-income ratio): Your total monthly debts divided by your gross monthly income.
Contingency: Extra money set aside for cost overruns on the project.
What the Decision Looks Like in Practice
Picture a homeowner with a dated condo and a clear contractor bid. They gather the bid, add a cushion and check the HOA’s rules on the work. They confirm their note date and title date. Then they ask a lender to run the sizing in three ways: a plain cash-out, a renovation loan, and keeping the first mortgage with a second lien.
The Loan Estimate shows the cash to close and the costs of each path side by side. The comparison to make is total cost and payment structure over the time you will hold the loan. A lower payment today can still cost more across the life of a bigger balance.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Can I use a cash-out refinance to pay for a condo renovation?
Yes, with limits. A plain cash-out refinance hands you cash and does not control how you spend it. A renovation refinance funds the work in draws. Either way, the loan has to fit under the program’s cap, and the condo project has to be eligible, subject to lender guidelines.
What if the renovation goes over budget?
Plan for it before you borrow. A contingency built into the loan covers modest overruns. Bigger overruns usually come out of your reserves, which is one reason not to borrow to the cap. On a renovation loan, changes to the plan may also need lender approval.
Will the appraiser count the value of my renovation?
It depends on the loan. A plain cash-out is appraised on the unit as it exists today, so unfinished work does not count. A renovation loan uses an as-completed value based on your plans. Either way, comparable sales in your building and area drive the number.
Can I take cash out and fund renovation on a HomeStyle-type loan?
Not both on the standard structure. Fannie Mae’s HomeStyle limited cash-out refinance does not allow cash back at closing. The money you receive is the renovation fund. If you also want spending cash, a plain cash-out may be the better fit.
Should I borrow the maximum?
Usually not. The maximum shows what the cap allows, not what your budget can carry. Borrowing less lowers your balance, your payment and your risk if the appraisal comes in lower than expected. Many borrowers do better by sizing to the project plus a cushion.
Next Steps
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. Bring your current loan details, the contractor bid and your HOA documents. Eligibility, terms and approval are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Condo renovation sizing comes down to one habit: start from the bid and work upward, so the building’s rules and the appraiser’s number never catch you short.
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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Selling Guide B4-2.1-02, Waiver of Project Review
3. Fannie Mae Selling Guide B5-3.2-01, HomeStyle Renovation Mortgages
4. Fannie Mae HomeStyle Renovation Product Summary
5. FDIC Summary of FHA 203(k) Rehabilitation Mortgage Insurance
6. VA Lender’s Handbook, Chapter 3: The VA Loan and Guaranty
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Time a Cash-Out Refinance for a Renovation or ADU · How to Handle a Low Appraisal on a Cash-Out Refinance for a Renovation · Cash-Out Refinance Appraisal Process for a Renovation or ADU Project
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.