The Quick Read: The most you can take is capped by a loan-to-value limit, not by your equity. On a conventional loan for a one-unit primary residence, the new loan can reach 80% of the appraised value, and the payoff, closing costs and fees come out of that. What is left is your cash. The limit drops to 75% for two- to four-unit homes, second homes and investment property, subject to lender guidelines and full file review.
Key Takeaways
- Equity is not the same as borrowable equity. The loan-to-value cap decides how much stays in the home.
- Net cash is the new loan minus the old payoff, closing costs and any financed fees.
- Conventional cash-out has seasoning rules: the loan being paid off must be 12 months old, and a borrower must have been on title for 6 months.
- Occupancy and unit count change the cap.
- Qualifying still depends on income, credit, ratios and the appraisal. Plenty of equity does not override them.
What Is a Cash-Out Refinance?
A cash-out refinance replaces your current first mortgage with a larger one. The old loan is paid off, and you receive the difference in cash. It is a new loan with a new rate and term, not an add-on. The CFPB’s home equity guide says the same thing: the payoff timeline may lengthen, the payment may rise, and your home is the collateral if you miss payments.
Lendmire’s cash-out refinance programs sit in this category. Lendmire is a mortgage broker and arranges these loans through wholesale lenders. It does not lend.
Two terms matter before the math:
- Equity is your home’s appraised value minus what you owe on it.
- Loan-to-value (LTV) is the new loan amount divided by the appraised value.
How Is the Maximum Calculated?
The maximum is value times the allowed LTV, minus everything that has to be paid out of that loan. Work it in this order:
1. Take the appraised value, not your estimate of it.
2. Multiply by the LTV cap for your program, occupancy and unit count. That is the largest new loan.
3. Subtract the payoff on your current first mortgage.
4. Subtract any second liens or HELOCs that must be paid off.
5. Subtract closing costs and any fees financed into the loan.
6. What remains is net cash.
Here is the shape of it with percentages only. Say a one-unit primary residence appraises at a given value and you owe 50% of it. The 80% cap leaves a gap of 30% of value before costs. Closing costs and fees come out of that 30%, so your cash lands below it. Financed mortgage insurance or funding fees raise the loan balance without raising the cash you receive.
The common mistake is treating value minus balance as available cash. It never is.
What Changes the Maximum?
Occupancy, unit count and loan type each set a different ceiling. Across the wholesale programs placed through Lendmire, conventional cash-out works like this:
| Property | Conventional cash-out max LTV |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
| Investment property | 75% |
Fannie Mae publishes these limits in its Eligibility Matrix, which is revised often. Confirm the current version before you plan around a number.
There is also a wholesale lane that reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, and that lane is not written there. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Government loans follow their own rules. HUD cut the FHA cash-out limit from 85% to 80% of value in Mortgagee Letter 2019-11. VA cash-out is capped by the VA’s interim rule at 100% of the property’s reasonable value. VA also adds a net tangible benefit test, a comparison disclosure and seasoning. Many lenders set a lower cap than the VA allows, so the program maximum and what a given lender offers can differ.
Where the Cash-Out Rule Gets Tested
The general rule breaks in a handful of named cases.
Seasoning. Under the Fannie Mae Selling Guide, the first mortgage being paid off must be at least 12 months old, measured from old note date to new note date. A borrower must also have been on title for six months, unless an exception applies. Inheritance and legal awards are among the exceptions. The 12-month test does not apply to a subordinate lien paid off in the deal. Files that assume seasoning away are the ones that get kicked back.
Delayed financing. A home bought with cash within the past six months can be cash-out refinanced if the purchase was arm’s-length and the source of funds is documented. The 2023 version of the Guide spells out the settlement-statement rule when the cash came from another loan: the proceeds must go to pay that loan off.
Free-and-clear homes. A new mortgage on a home with no loan counts as a cash-out refinance, not a rate-and-term.
Listed homes. A property that was listed for sale generally has to come off the market on or before the new loan’s disbursement date.
Temporary buydowns. A loan with a temporary interest rate buydown is not eligible for conventional cash-out.
Government streamlines. The FHA Streamline and the VA IRRRL are no-cash products for existing government loans. Do not confuse them with cash-out. A conventional rate-and-term refinance is also a different loan: it goes to 95% LTV on a one-unit primary residence and allows only incidental cash back. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
What the Lender Checks Beyond Equity
Equity opens the door. Four other things decide whether the file clears.
- The appraisal. Value drives the LTV ceiling, and a low appraisal shrinks the cash dollar for dollar at the cap. Say the home appraises 5% under what you expected. At an 80% cap, the maximum loan drops by 4% of your expected value, and the full drop comes out of your cash. A well-documented reconsideration request with recent nearby sales can sometimes recover value.
- Credit. Wholesale conventional programs start at a 620 decision score, and the automated finding governs most files. Waiting periods after credit events are agency rules: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
- Ratios. The automated total-ratio ceiling is 50%. Manually underwritten files run at 36% or 45%, with reserve and score factors from the Eligibility Matrix. Fannie’s matrix also asks for reserves on some files when DTI is above 45%.
- Documents. Expect pay stubs, W-2s, asset statements and a payoff statement. Missing a second-lien payoff letter is a routine reason a file stalls.
The Maximum Is Not the Smart Amount
Taking the full cap is a choice, not a requirement. Before you do, run three checks.
1. Payment stress test. The new loan is larger and the term may restart. The CFPB guide warns the payment may rise. Ask for the full cost picture on the Loan Estimate before you commit.
2. Equity cushion. As the balance rises, equity falls. At an 80% cap you keep 20% of value in the home. If values dip, that cushion is thin.
3. What the money does. Paying off a home improvement bill is different from clearing cards. Moving card balances into a mortgage turns unsecured debt into debt secured by your home. If the card balances return, you have the old debt and the new one.
A borrower with a low existing first mortgage should weigh all of this against simply keeping the loan. A cash-out replaces that loan, so you give up its terms along with its balance.
Costs and the Right to Cancel
Closing costs come out of the proceeds or get rolled into the balance. Either way they reduce what you net. FHA and VA add mortgage insurance or a funding fee on the whole loan, and those financed amounts count toward the cap.
Mortgage insurance is required on conventional loans above 80% LTV. You can request cancellation at 80% of original value with good payment history, and the servicer must end it automatically at 78%. At the standard 80% cash-out cap, the issue usually does not arise.
You also get time to reconsider. Per the CFPB’s rescission guidance, a refinance on your home carries a three-business-day right to cancel, and cancellation must be in writing. Funds are disbursed after that period ends.
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
Seasoning: the required age of the loan being paid off and the time a borrower has been on title.
Delayed financing: a cash-out on a recently bought home, allowed when the purchase was arm’s-length and the funds are documented.
Limited cash-out refinance: a rate-and-term refinance that pays off the first mortgage and costs, with only incidental cash back.
Net tangible benefit: a test on VA and FHA streamlines that the borrower gets a real, measurable gain.
Disbursement: the date loan funds are released, after the rescission period.
Frequently Asked Questions
How much cash can I actually take out?
It depends on appraised value, the LTV cap and your payoff. On a conventional one-unit primary residence, the new loan can reach 80% of value. Subtract your current mortgage, any liens and closing costs, and the remainder is your cash. Subject to lender guidelines and full file review.
Do I need an appraisal?
Yes on conventional cash-out. Freddie Mac requires a new appraisal and inspection report on its cash-out product. Value sets the ceiling, so the appraisal changes your number directly.
Can I qualify with weaker credit?
Sometimes, but equity does not replace credit. Wholesale conventional programs start at a 620 decision score, and some lenders set a higher floor. Government loans use different standards, and lender overlays vary.
Can I cash out a home I just bought?
Usually not right away. The loan being paid off must be 12 months old, and a borrower must have been on title for six months. Delayed financing is the exception for recent cash purchases.
Is a cash-out refinance better than keeping my current loan?
It depends on what you give up. The new loan replaces your rate and remaining term. Compare the full cost of the larger loan, not just the new terms, and consider how much equity you want to keep.
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. For a deeper look at the decision, read Lendmire’s piece Should You Take the Maximum Cash-Out Refinance or Leave Equity?. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
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. CFPB: Using home equity to meet financial needs
2. Fannie Mae Eligibility Matrix
3. HUD Mortgagee Letter 2019-11
5. Fannie Mae Selling Guide B2-1.3-03
6. Fannie Mae Selling Guide B2-1.3-03 (earlier version)
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: Cash-Out Refinance Documentation for Overtime With Strong Equity · How Much Equity a Vacation Home Cash-Out Refinance Releases at the Cap · Cash-Out Refinance File Requirements for Equity-Rich Homeowners
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.