The Quick Read: A conventional cash-out refinance replaces your current mortgage with a bigger one and pays you the difference. The agencies set the baseline rules, so lenders start from the same place. Offers still differ, because each lender adds its own pricing, file handling, and extra rules (called overlays). The best offer leaves you the most usable cash at the lowest total cost over the years you will keep the loan, once the quotes are lined up fairly.
Key Takeaways
- On a one-unit primary residence, a conventional cash-out refinance tops out at 80% loan-to-value (LTV). That is the loan balance divided by the home’s appraised value.
- The loan you pay off must be at least 12 months old, and a borrower must have been on title for 6 months.
- Same agency loan, different answers: pricing and overlays vary by lender.
- Compare net cash and total cost, not just the headline loan amount.
- A cash-out refinance is not always the right tool. Sometimes keeping your current loan is better.
What Is a Conventional Cash-Out Refinance?
A conventional cash-out refinance is a new first mortgage that pays off your old one and puts the leftover equity in your hands. “Conventional” means it follows Fannie Mae and Freddie Mac rules rather than FHA or VA rules. Freddie Mac defines it as a mortgage with no specific restrictions on how you use the proceeds. Lendmire’s cash-out refinance programs are arranged around these same agency rules.
Here is a detail that surprises people. If you own your home free and clear, a new mortgage on it still counts as cash-out. Fannie Mae’s Selling Guide treats a new loan on a property with no mortgage lien the same way. Owning outright does not get you out of the cash-out rules.
The loan also has to fit under the conforming loan limit, which the FHFA sets by county. Check your county on the FHFA conforming loan limit page. Above that limit, jumbo programs take over.
How Much Cash Will You Actually Receive?
Your cash is the new loan minus the payoff, the closing costs, and any other liens you clear. The new loan can’t exceed 80% of the appraised value on a one-unit primary residence. Two- to four-unit primary residences are capped at 75%, per the Fannie Mae Eligibility Matrix.
Picture a home appraised at a round number, with a first mortgage at 50% of that value. At an 80% cap, the new loan could reach 80%, leaving a 30-point slice of value before costs. Closing costs and any second liens come out of that slice. What you receive is the remainder. The cap is a ceiling, not a promise.
Because the appraisal sets the value, it largely decides your cash. A low appraisal shrinks the number at once.
One state quirk: in Texas, a cash-out on the homestead is capped by the state constitution at the agency figure. Everything here is subject to lender guidelines and full file review.
What Does the Lender Check? (Underwriting, Step by Step)
Underwriting is the lender’s review of whether you and the property fit the loan. Here is the sequence I see on nearly every file.
1. Pre-screen the clocks. The first mortgage being paid off must be at least 12 months old, counted from the old note date to the new note date. At least one borrower must have been on title for six months. If the property was listed for sale, it must be off the market by the time the new loan funds.
2. Occupancy. On a primary residence, every borrower must live in the home.
3. Credit and ratios. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files, with a 50% total debt-to-income ceiling. Manually underwritten loans use 36% or 45%, with the reserve and score factors of the Eligibility Matrix. Fannie Mae requires six months of reserves on automated files with a ratio above 45%, per its cash-out rules. Reserves are liquid savings left after closing.
4. Appraisal. Value drives LTV. Some files get an appraisal waiver, where Fannie Mae accepts the lender’s value estimate. The automated system decides whether to offer one, and it won’t if a recent appraisal was already uploaded for the property. Don’t count on it for a cash-out.
5. Pricing. Cash-out loans carry their own loan-level price adjustment, a pricing add-on based on credit score and LTV. It rises as the score falls and leverage rises, and it is generally built into pricing rather than shown as its own line.
6. Closing and payoff. The new loan pays the old mortgage first, then the costs, and you receive what is left.
Why Do Lenders Give Different Answers on the Same Loan?
Fannie Mae and Freddie Mac set the floor. Lenders can build stricter rules on top. One lender may want a higher credit score, more reserves, or tighter handling of a recent title change. Another may take the same file as is.
Pricing differs too. Each lender decides how to price the same loan-level adjustments and how much margin to add. That is why identical files get different offers.
This is also where the lender channel matters. A bank can only offer its own menu. A broker, which is what Lendmire is, arranges loans through multiple wholesale lenders and matches your file to the one whose rules fit best. A broker does not lend, and the lender still decides on eligibility.
| Channel | Menu | Fits best when | Ask |
|---|---|---|---|
| Bank or credit union | Its own products | Your file is simple | Any extra rules beyond the agency’s? |
| Online lender | Own products, set process | You want less hand-holding | Who handles problems on the file? |
| Broker | Several wholesale lenders | Your file has a wrinkle | How is the broker paid? |
How Do You Make Two Quotes Comparable?
Quotes only compare when you control the variables. Ask every lender for the same thing, then look at what differs.
| Must match | May differ |
|---|---|
| Loan type and term | Points and lender credits |
| Loan amount and cash requested | Pricing and fees |
| Property and occupancy | Lender overlays |
| Lock period | Services and process |
| Date of the quote | Estimated cash to close |
If one lender quotes a different lock period or a different amount, you are comparing two different loans.
How Do You Read the Loan Estimate?
The Loan Estimate is the standard three-page form every lender must give you. It lets you compare offers section by section. Focus on three places.
- Loan amount and terms. Confirm they match what you asked for.
- Closing cost sections. Lender charges are where real differences show. Third-party charges like title often look alike.
- Estimated Cash to Close. On a cash-out loan this reflects your net result. If the number differs from what you expected, ask the lender to explain it.
Later, compare your Closing Disclosure to the latest Loan Estimate. Monthly payment, costs, and cash to close should match. Ask about any significant change.
Also ask how the broker or lender is paid. Compensation is disclosed, and you should compare full terms, not one line.
How Do You Total the Cost Over the Years You’ll Keep the Loan?
A lower monthly payment is not the same as a lower cost. Think in three steps.
1. Decide how long you’ll realistically keep the loan before selling or refinancing again.
2. For each offer, add the upfront costs and the interest and payments you’d make over that stretch.
3. Compare the totals. If one offer costs more upfront but less over time, the break-even point tells you how long you need to stay for it to win.
Points and lender credits shift cost between today and later. Paying more upfront can lower the payment, while taking a credit can reduce cash due at closing. Rolling costs into the loan makes cash due at closing look smaller, but the balance and lifetime interest go up. A “no-closing-cost” offer is not free. The costs are built into the rate or the balance.
Which File Edge Cases Change Which Lender Fits?
The general rule breaks in a handful of named situations. These are where lender choice matters most.
- Recent purchase. Delayed financing is an exception inside the cash-out rules, for buyers who purchased within the past six months. It waives only the title wait. The loan is still priced and limited as cash-out, and the source of funds must be documented.
- Inheritance or divorce. No title wait applies to inherited property or property legally awarded in a divorce, separation, or dissolution of a domestic partnership.
- Title held in an LLC. Freddie Mac has exceptions that can count time held in an LLC or LP, if title moves to you by the note date.
- Paying off a home equity line. Freddie Mac’s 12-month age rule has exemptions for first liens that are HELOCs and for special-purpose cash-out loans such as a co-owner buyout. Details are described by a compliance vendor. Confirm with your lender.
- Ineligible situations. Fannie Mae excludes loans with a temporary rate buydown, certain PACE loan situations, HomeStyle Energy loans, and payoff of an installment land contract.
- Limited cash-out is a different product. If you only want to replace your loan and get incidental cash back, the rules are lighter. Check RefiNow notes too, since that program is limited cash-out only.
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.
A mortgage insurance note: cash-out above 80% LTV isn’t a standard conventional option, so mortgage insurance rarely enters the picture. Where insurance does apply to conventional loans above 80%, it can be canceled at your request at 80% of original value and ends automatically at 78%.
One more thing on a second home or rental: occupancy decides leverage. A cash-out on a second home or investment property is capped at 75%, lower than the 80% on your primary residence.
What If One Lender Declines or Cuts Your Cash-Out?
A decline from one lender is not a verdict on your file. It is often an overlay, a seasoning clock, or an appraisal result. Ask three questions.
- Was it a reason the agencies set, or the lender’s own rule?
- Can the clock be satisfied with documents, such as the old note date or title history?
- If the appraisal came in low, can the cash amount be cut instead of the loan dying?
If the reason is an overlay, another wholesale lender may take the same file. That is where a broker earns the comparison. If the reason is an agency rule, such as a 12-month clock, waiting is the honest answer.
Should You Do This at All?
Sometimes not. Replacing your whole first mortgage means you give up the old loan’s terms. A home equity loan or HELOC leaves the first mortgage in place. The CFPB’s home equity booklet notes that cash-out closing costs are generally higher, that you keep one mortgage payment, and that falling behind can cost you your home.
Weigh how much you need, how long the new loan will run, and what you’d give up. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
For where the leverage cap bites, see Lendmire’s piece on maxing out equity and where lenders stop.
Shopping Checklist
Ask every lender the same questions.
1. What is the maximum loan on my property and occupancy?
2. Do you add rules beyond Fannie Mae and Freddie Mac?
3. How do my seasoning and title clocks look?
4. How is the pricing adjustment reflected in my offer?
5. What are the points or credits, and what do they change?
6. What is my Estimated Cash to Close, net of payoff and liens?
7. What lock period did you quote?
8. How are you or the broker paid?
Key Terms Defined
Seasoning: The waiting period before you can refinance, measured from the old loan’s note date and from when you took title.
Overlay: A lender’s own rule that is stricter than the Fannie Mae or Freddie Mac baseline.
Loan-level price adjustment (LLPA): A pricing add-on tied to credit score, LTV, and loan purpose.
Estimated Cash to Close: The Loan Estimate line showing what you bring or receive at closing.
Reserves: Liquid savings you keep after closing, counted in months of payments.
Frequently Asked Questions
Can I get a cash-out refinance if I own my home free and clear?
Yes. A new mortgage on a property with no lien is still treated as cash-out. The same LTV cap and pricing adjustments apply. The six-month title test still applies unless an exception covers you.
How soon after buying can I do a cash-out refinance?
Usually after six months on title, with exceptions. Delayed financing covers recent purchases when the source of funds is documented. The loan is still cash-out for LTV and pricing. If you are paying off a first mortgage, it must also be at least 12 months old.
Is a cash-out refinance priced like a regular refinance?
No. Cash-out loans carry their own pricing adjustment based on credit score and LTV. It is built into price rather than shown as a separate fee, so ask each lender how it appears on your offer.
Will shopping multiple lenders hurt my credit?
Shopping within a short window for the same loan type is generally handled as one inquiry, but policies vary. Ask each lender about its credit pull before you apply, and keep your quotes on the same day so they compare cleanly.
Is a HELOC cheaper than a cash-out refinance?
Not necessarily. A HELOC leaves your first mortgage in place, and cash-out closing costs are generally higher. The better choice depends on your existing loan and how long you’ll keep the new one.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Freddie Mac Seller/Servicer Guide §4301.5
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. FHFA conforming loan limit data
4. Fannie Mae Eligibility Matrix
5. CFPB Loan Estimate explainer
6. CFPB Closing Disclosure explainer
7. DocMagic summary of Freddie Mac Bulletin 2022-25
8. Fannie Mae (document 20786)
9. CFPB HELOC booklet (cash-out comparison)
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 Conventional Cash-Out Refinance Money on Anything? · Can You Do a Conventional Cash-Out Refinance Without a Mortgage? · Conventional Cash-Out Refinance for Borrowers Past the Appraisal Stage
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.