The Quick Read: On a conventional loan, the typical ceiling is 80% loan-to-value (LTV) for a one-unit home you live in. That cap applies to the whole new loan, not to your equity. Two- to four-unit homes, second homes and rentals sit lower, at 75%. What you actually receive is the cap, minus your payoff, any other liens and the costs of the new loan, subject to lender guidelines and full file review.
Key Takeaways
- The 80% figure is a ceiling on the new loan as a share of appraised value. It is not a share of your equity.
- Your cash is what is left after payoff, other liens, closing costs and prepaids come out of the maximum loan.
- Occupancy and unit count change the ceiling. A primary one-unit home gets the highest conventional cash-out leverage.
- The appraisal sets the denominator. A lower value shrinks your cash faster than most owners expect.
- Two seasoning clocks apply, one for the loan and one for time on title.
Key Terms Defined
Loan-to-value (LTV): Your loan balance divided by the home’s appraised value, shown as a percentage.
Combined LTV (CLTV): All loans secured by the home, added together, divided by the appraised value. A second mortgage counts here.
Cash-out refinance: A new first mortgage that pays off the old one and can return the extra to you, with no restriction on how you use the money.
Limited cash-out (rate-and-term) refinance: A refinance that pays off the old loan and costs, with only incidental cash back.
Seasoning: The minimum age of a loan, or the minimum time you have held title, before a lender will allow a cash-out.
What Does the Typical LTV Ceiling Actually Measure?
It measures the total new loan against what an appraiser says the home is worth. If the ceiling is 80%, the new mortgage cannot exceed 80% of that value.
This trips up many owners. They hear “80%” and think they can pull 80% of their equity. They cannot. The cap leaves you with at least 20% of the home’s value as equity after closing.
Here is the plain logic. A conventional lender treats cash-out as riskier than a plain refinance. So it asks you to keep more skin in the game. A home that is paid off still counts as a cash-out refinance if you take a new loan on it.
Lendmire’s cash-out refinance programs follow the same structure, and each lender’s guidelines apply on top of it. A broker arranges the loan through wholesale lenders. The broker does not lend.
Cash-Out Refinance for Owners: The Three-Step LTV Check
You can test your own numbers in a few minutes. Gather three inputs and run three steps.
1. Gather your inputs. You need your current mortgage payoff, a realistic estimate of value, and a list of any second mortgage or HELOC.
2. Compute current LTV. Divide the payoff by your value estimate. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
3. Compute headroom. Subtract your current LTV from the ceiling. At 60% and an 80% cap, you have 20 points of gross headroom.
Then take the last step most owners skip. Subtract other liens, closing costs and prepaid items (such as the first tax and insurance deposits) from that headroom. What remains is your approximate cash.
Costs matter because they are part of the new loan. A lender cannot waive the cap just because the extra money went to fees.
Three Worked Examples
These are hypothetical. Every figure is a share of the appraised value, so no dollar amounts are needed.
| Case | Payoff | Cap | Gross headroom | Result after costs |
|---|---|---|---|---|
| Comfortable equity | 50% | 80% | 30% | Meaningful cash |
| Thin headroom | 74% | 80% | 6% | Costs can swallow most of it |
| Appraisal shortfall | 60% | 80% | 20% falls to 16% | Cash drops by a fifth |
Comfortable equity. The owner’s payoff sits at 50% of value. The cap allows a new loan up to 80% of value. That is 30 points of headroom before costs.
Thin headroom. The owner’s payoff sits close to the maximum loan-to-value the cap allows. Only 6 points remain before costs. Closing costs and prepaids can consume most or all of that. A cash-out here may not make sense.
Appraisal shortfall. The owner expected a value of 100 and carries a 60% payoff. At 100, the max loan is 80, so headroom is 20 points. The appraisal comes in at 95. The max loan becomes 76 on that same scale, and headroom falls to 16. A 5% miss on value cut the cash by 20%.
That last case is why a small appraisal swing deserves respect. The cap moves with the value, but your payoff does not.
How Occupancy and Unit Count Change the Ceiling
Occupancy decides the leverage. The conventional cash-out ceiling for a one-unit primary residence is higher than for any other property type.
| Property | Typical cash-out ceiling |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
The Fannie Mae Eligibility Matrix lists these caps by occupancy and unit count. Freddie Mac’s limits align with them. A rental property also sits at 75% on conventional cash-out, so occupancy alone moves the number.
For the full breakdown, see Lendmire’s page on cash-out refinance LTV caps by occupancy and unit count.
Cash-Out vs. Limited Cash-Out: Why the Classification Matters
The same house can face very different leverage depending on how the loan is classified. A limited cash-out refinance, sometimes called rate-and-term, allows up to 95% LTV on a one-unit primary residence. It reaches 97% in the narrow case where the existing loan is agency-owned and the first-time-buyer program allows it. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The new loan pays off the existing first mortgage and the closing costs. It can also pay off a purchase-money second lien. Only incidental cash comes back.
Take more than that, and the file becomes a cash-out. The cap then falls from 95% to 80%. A rate-and-term loan above 80% LTV also carries mortgage insurance, which a cash-out at the 80% cap does not need. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
So the question “what is my typical LTV ceiling” depends on a prior question: how much cash do you want?
Which Binds First: LTV or Loan Size?
Two limits can apply at once. The first is the LTV ceiling. The second is the conforming loan limit, which is the maximum loan size agencies will buy. It varies by county. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Use this decision rule. Work out the maximum loan under the LTV cap. If that figure exceeds your county’s conforming limit, the loan size binds first. Anything above the limit becomes a jumbo loan, which follows separate lender rules outside the agency framework.
For most owners in mid-priced homes, LTV binds first. In expensive housing markets, loan size can bind first.
The Seasoning Rules: Two Clocks, Not One
Conventional cash-out has two separate time tests. Both apply.
- Loan seasoning. The mortgage being paid off must be at least 12 months old, measured note date to note date. Fannie Mae announced this requirement for cash-out refinances.
- Title seasoning. At least one borrower must have been on title for six months. Freddie Mac’s Guide Section 4301.5 describes this test too.
Exceptions exist. Inherited property and property legally awarded in a divorce or separation are recognized. A delayed financing path also lets a recent cash buyer pull money out, under conditions such as an arms-length original purchase. Fannie Mae Selling Guide B2-1.3-03 spells those conditions out.
Where the General Rule Breaks
The 80% figure is a typical ceiling, not a promise. Several things narrow or change it.
- Lender overlays. An individual lender can set a stricter ceiling than the agency does. A published ceiling is a maximum, not what every borrower receives.
- Credit and ratios. On the wholesale conventional programs Lendmire places files with, the floor starts at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. DU cash-out files with a ratio above 45% also face reserve requirements under the Matrix. Lendmire’s page on cash-out refinance credit requirements by occupancy and LTV goes deeper.
- Ineligible structures. Some transactions cannot be cash-out, including loans with a temporary interest rate buydown and financing taxes that are more than 60 days delinquent without an escrow account.
- Community seconds. These are not permitted alongside a cash-out refinance.
- Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. The wholesale lane described below is not written there.
- A higher-leverage lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. It is a narrow exception, and it is not the typical ceiling.
- Government programs. FHA and VA have their own cash-out rules and caps. They are different programs with different math, so do not assume the conventional number carries over.
What About Mortgage Insurance?
Mortgage insurance is required on conventional loans above 80% LTV. You may ask to cancel it at 80% of the original value, with good payment history, no subordinate liens and no decline in value. The servicer must terminate it automatically at 78%. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Published typical annual premiums run from 0.58% to 1.86% of the balance. That is a range, not a quote. Because a standard cash-out stops at 80%, mortgage insurance usually enters the picture only if you move to a lane above that.
If You Are Over the Ceiling
Many owners find their numbers fall short. You have choices.
- Pay down the balance. Even a modest paydown moves your starting LTV.
- Wait for the loan to age or the value to rise. Time can fix a seasoning problem or a thin-equity problem.
- Ask about the appraisal. If the report missed comparable sales, a lender can review a request to reconsider the value. It is not guaranteed to change the result.
- Compare a second-lien product. A HELOC or home equity loan leaves your first mortgage in place and adds a second payment. Its balance counts toward combined LTV, so the same equity math applies.
Is a Cash-Out Refinance Worth It?
It depends on the size of the draw and what you plan to do with it. A cash-out replaces your current mortgage with a larger one. Your monthly payment may rise, your payoff timeline may lengthen, and your interest rate and other terms change, as the Consumer Financial Protection Bureau explains.
Small draws are the test. If closing costs absorb most of the cash, the refinance may not pay for itself.
The CFPB also flags a risk with debt consolidation. Paying non-mortgage debts with mortgage debt can increase foreclosure risk. Its research found that card balances dropped sharply after a cash-out, then trended back toward earlier levels.
One broker-level observation: the files that go well tend to start with a clear purpose for the money, such as a repair or a defined payoff. They also leave real room between the new loan and the cap. The files that struggle often start at the ceiling with no cushion for a low appraisal.
Frequently Asked Questions
What is the typical maximum LTV on a conventional cash-out refinance?
It is 80% for a one-unit principal residence. Two- to four-unit principal residences, second homes and rentals are capped at 75%. These are the standard agency ceilings, and your lender may set a stricter one.
Does 80% LTV mean I can borrow 80% of my equity?
No. The cap applies to the entire new loan as a share of appraised value. If your balance is 60% of value, your gross headroom is 20 points of value, before payoff of other liens, costs and prepaids. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Can I do a cash-out refinance if my home is paid off?
Yes. A new loan on a free-and-clear home is still a cash-out refinance. The same ceiling, appraisal and seasoning rules apply, subject to lender guidelines.
How long do I need to own the home or hold the loan?
Two clocks apply. The loan being paid off should be at least 12 months old, and at least one borrower needs six months on title. Inheritance, legal awards and delayed financing have exceptions.
What happens if the appraisal comes in low?
The maximum loan shrinks with the value, and your cash shrinks faster. If the value falls 5%, headroom can drop by much more than 5%. You can pay down the balance, request a reconsideration of value, or wait.
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. Program details 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. Fannie Mae Eligibility Matrix
2. Fannie Mae Capital Markets, cash-out refinance eligibility update
3. Freddie Mac Guide Section 4301.5
4. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
5. Consumer Financial Protection Bureau
6. Paying non-mortgage debts with mortgage debt
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 Apply for a Conventional Cash-Out Refinance Step by Step · Can You Cash Out Refinance a Vacation Home Under Conventional Rules? · Bank vs Wholesale Lender for a Conventional Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.