The Quick Read: On a conventional loan, the limit is set by loan-to-value, not by a dollar amount. For a one-unit home you live in, the new first mortgage can reach 80% of the appraised value. The cash that lands in your account is smaller than that. The payoff of your old loan, any liens being cleared, and financed closing costs all come out first. That leaves at least 20% of the home’s value untouched.
Key Takeaways
- The 80% cap applies to the total new loan, not to the cash you receive.
- Two- to four-unit primary residences and second homes sit at 75%.
- Appraisal value, existing liens, and costs decide your real number more than the cap does.
- Timing rules apply: at least 12 months on the loan being paid off and 6 months on title, with named exceptions.
- A cash-out loan replaces your whole first mortgage, so the old loan’s terms go away.
What Is a Conventional Cash-Out Refinance?
A cash-out refinance is a new first mortgage that pays off your current one and gives you the difference in cash. “Conventional” here means a conforming loan sold to Fannie Mae or Freddie Mac. It is not FHA or VA.
The agencies also count a new loan on a home with no mortgage as cash-out. Under the Fannie Mae Selling Guide’s cash-out rules, a paid-off house is not a “free” case. Freddie Mac treats free-and-clear properties the same way in its Guide section on cash-out. So a refinance that puts any real cash in your hands falls into this category.
Lendmire’s cash-out refinance programs run through wholesale lenders. They follow these agency rules as a baseline. Individual lenders may add stricter overlays on top.
The rest of this page works through the mechanics in order. First comes the formula, then a worked example, then what shrinks your cash. After that come the rule exceptions and the decision itself.
The Formula: How Much Can You Actually Take?
Start with the appraised value. Multiply it by the cap for your property type. Subtract everything the new loan must pay off or cover. What remains is your cash.
1. Appraised value × cap = maximum new first mortgage.
2. Subtract the payoff of your current first mortgage.
3. Subtract any second lien or HELOC being paid off.
4. Subtract financed closing costs, prepaids, and any past-due taxes the loan must clear.
5. The remainder is net cash to you.
Step 1 hides a detail. The cap applies to loan-to-value, combined loan-to-value, and home-equity combined loan-to-value together. A second lien that stays in place counts toward the combined ratios. A HELOC may count at its full credit limit, even if you have drawn little of it.
The Fannie Mae Eligibility Matrix sets the one-unit primary residence cap at 80%. It applies to fixed and adjustable loans in the standard automated channel.
A Worked Example in Percent of Value
Think of the home’s appraised value as 100%. The figures below are modeled assumptions for illustration, not quotes, and no dollar amounts are needed.
| Line item | Share of value |
|---|---|
| Maximum new loan (80% cap) | 80% |
| Existing first mortgage payoff | 50% |
| Second lien or HELOC payoff | 5% |
| Financed costs (assumed placeholder) | 2% |
| Net cash to you | 23% |
| Equity before the loan | 45% |
| Equity left in the home after | 20% |
Notice how the borrower holds 45% equity but takes out 23% of value in cash. That is roughly half of the equity. The equity left in the home is 20% of value, which is the required cushion. The other 2% of the drop in equity went to the financed costs. The second lien (5%) and those costs (2%) were paid out of the new loan instead of reaching the borrower. Those items did not vanish. They became part of the new, larger first mortgage.
Why “80% of My Equity” Is the Wrong Mental Model
The 80% figure is a limit on total debt against the home. It is not a share of your equity.
A borrower with 60% equity and a small payoff has lots of room under the cap. A borrower with 25% equity has almost none, because the existing loan already sits near the ceiling. Two homeowners with the same house value can walk away with very different cash.
Another common mix-up is a “limited” refinance versus a cash-out. A rate-and-term (limited cash-out) refinance on a one-unit primary home can reach 95% leverage, with mortgage insurance above 80%. It allows only incidental cash back. Once the extra cash passes that small allowance, the loan is reclassified as cash-out and the cap drops to 80%. Taking “a little extra” can change which rulebook applies to the whole loan. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
What Shrinks Your Cash
Four things cut into the number, and the appraisal is the one borrowers underestimate.
The appraisal. On a refinance, value comes from the appraisal. (A purchase uses the lower of price or appraised value, but there is no price here.) A value that comes in low shrinks the cap, while your payoff stays the same. Say you expect 100% of value and the appraisal lands 5% lower, with payoffs and costs unchanged:
| Scenario | Max loan | Payoffs and costs | Net cash |
|---|---|---|---|
| Appraisal as expected | 80.0% of expected value | 57% | 23.0% |
| Appraisal 5% lower | 76.0% of expected value | 57% | 19.0% |
A 5% miss on value cuts cash by about 17%. The loss lands entirely on your side of the table, because the payoff does not move.
Freddie Mac also rounds loan-to-value up to the next whole number, so 80.01% counts as 81%. That is spelled out in Freddie Mac’s Guide on maximum loan-to-value. A file that lands a hair over the cap does not get a pass.
Liens and costs. Remaining second liens count toward the combined ratios. Closing costs, prepaids, and escrow setup are real, even when financed. The Fannie Mae guide allows the new loan to cover the existing first-mortgage payoff, closing costs, points, prepaids, and real estate taxes. Each financed item reduces your cash dollar for dollar.
Loan size. The conforming loan limit is a second ceiling. It caps the new loan amount no matter what the percentage math says. The limit varies by county and unit count, so check the current limit for your county before assuming the cap math is the whole story.
Lender judgment. The agencies set maximums, not guarantees. Credit profile, reserves, and overlays can all pull a lender below the cap.
Cap by Property Type
Occupancy decides the cap. Across the programs Lendmire works with, the standard cash-out limits look like this, subject to lender guidelines:
| Property | Maximum cash-out LTV |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
Investment property also sits at 75%, but that is a different loan type with its own rules and outside the scope of this page. One more difference is that a lender may set a cap lower than any of these. Credit score, debt ratios, and property type can all move the number.
Which Limit Binds First?
Run both tests. The lower result is your ceiling.
- Test one: appraised value × cap. This binds on most moderately priced homes.
- Test two: the county’s conforming loan limit. This binds on higher-priced homes, where 80% of value would exceed the limit.
If the first number is lower, equity is your constraint. If the second is lower, loan size is. Above the conforming limit, jumbo lanes take over, with their own credit and leverage rules.
The 89.99% Lane
There is one exception to the 80% rule. Some wholesale programs reach 89.99% LTV on a cash-out with no mortgage insurance. Based on the programs Lendmire places, this lane requires a 680 score and a 50% total ratio. It is limited to a thirty-year fixed on a primary residence with a conforming balance. It carries its own six months of seasoning. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
It is a narrow lane, not a general rule. It is also not written everywhere. In Texas, the state constitution caps a cash-out on the homestead at the agency figure, so this lane is not offered there. Confirm eligibility early: subject to lender guidelines and full file review, a file either fits the lane or it does not.
Timing Rules: Seasoning and Where They Bend
Even with plenty of equity, you may have to wait, because seasoning rules set timing requirements that apply before a cash-out refinance can fund.
- Title seasoning. At least one borrower must have been on title for 6 months before the new loan funds. Both agencies apply this.
- Existing-loan seasoning. The first mortgage being paid off must be at least 12 months old, measured from note date to note date. Freddie Mac’s cash-out section states this, and Fannie Mae’s matrix carries a parallel rule.
Home values rising does not shorten either clock. The rules bend in named cases:
- Delayed financing. A cash buyer can take cash out within six months of purchase. The purchase must have been arm’s-length and the source of funds documented. The new loan is capped at the documented initial investment plus financed costs. It still meets the loan-to-value cap and carries cash-out pricing.
- Inheritance or legal award. No title wait applies if the lender documents the inheritance or a divorce-related award.
- Revocable trust. Time held in your revocable trust can count toward the six months if you are the primary beneficiary.
- Co-owner buyouts. A buyout may qualify as limited cash-out if the criteria are met, and the borrower acquiring sole ownership generally cannot take proceeds.
- Listed homes. A property listed for sale must be off the market on or before funding.
- Past-due taxes. Taxes more than 60 days delinquent can be financed, but an escrow account is then generally required.
Some of these exceptions have extra conditions, and lenders may layer on their own. Treat the list as a map of where to ask, not as a promise.
What the Decision Looks Like in Practice
A cash-out refinance is two decisions at once. One is whether to borrow against the home. The other is whether to give up your current first mortgage to do it.
You replace the whole loan. The new loan takes over the old one entirely. Your existing balance and its original terms are gone. If your current loan is a good one, you are putting it at risk to reach the cash, and the cash may cost more than it looks. That is the case for comparing against a separate second loan or HELOC, which leaves your first mortgage in place.
Mortgage insurance and the cushion. Above 80% loan-to-value, mortgage insurance applies. The standard cash-out cap stops at 80%, so you generally avoid it, but you also keep at least 20% of value as a buffer. A buffer helps if values dip.
What the cash is for. The CFPB’s study of cash-out borrowers found that paying off other debts and funding home repairs were the most common uses. The same release cautions that paying non-mortgage debt with mortgage debt can raise foreclosure risk. Card debt becomes debt secured by your home. That is a real tradeoff, not a footnote.
It is not final on signing day. On a refinance of your primary home, you get a short federal right to cancel. Purchase loans have no such right. Funds are not released until that window has passed.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Your Number Worksheet
Work through this before you apply:
1. Estimate your home’s value conservatively. Then run it 5% lower. 2. Pick your cap: 80%, 75%, or a lender-specific lower figure. 3. Multiply value by the cap. 4. Subtract your first-mortgage payoff, any second lien, and a placeholder for costs. 5. Check your county’s conforming limit against step 3. 6. Confirm your dates: 12 months on the old loan, 6 months on title. 7. Compare the result to what you actually need.
If the answer from step 4 is small, ask whether the cash justifies replacing your whole loan. That is the break-even question, and only you can answer it.
Key Terms Defined
Loan-to-value (LTV): The new loan balance divided by the home’s appraised value.
Combined loan-to-value (CLTV): All mortgage debt on the home, including second liens, divided by value.
Seasoning: The minimum time you must have owned the home or held the loan you are paying off.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with only a small amount of cash back.
Delayed financing: An exception that lets a recent cash buyer take cash out before the usual six months pass.
Conforming loan limit: The yearly cap on loan size that Fannie Mae and Freddie Mac can buy.
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.
Frequently Asked Questions
Can I take out 80% of my home’s value in cash?
No. The 80% is the limit on the total new loan, not on your cash. Your old mortgage, any second lien, and financed costs are paid from that amount first. What is left is your net cash, which is often well under half of the cap.
What happens if the appraisal comes in low?
Your cash falls faster than the value does. The cap shrinks with the appraised value, but your payoff stays the same. A 5% miss on value can cut your net cash by roughly a sixth, depending on your starting equity. A lender may also lower the amount if the file is weaker than expected.
Do I have to leave equity in the home?
Yes. On a standard one-unit primary residence cash-out, at least 20% of the value stays untouched. Two- to four-unit homes and second homes leave at least 25%. Some lenders set a larger cushion through their own overlays.
Can I refinance if I bought the home recently?
It depends on how you bought. Cash buyers can use delayed financing within the first six months. Otherwise, at least one borrower needs six months on title, and the loan being paid off needs 12 months of age. Inheritance and certain legal awards waive the title wait.
Does a HELOC change how much I can take?
Yes. A HELOC that stays open counts toward the combined ratios, and may count at its full limit even if unused. If the HELOC is paid off and closed with the new loan, that payoff reduces your cash instead. Either way, it affects the number.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
2. Freddie Mac Seller/Servicer Guide, Section 4301.5
3. Fannie Mae Eligibility Matrix
4. Freddie Mac Seller/Servicer Guide, Section 4203.1
5. CFPB’s study of cash-out borrowers
6. CFPB: How long do I have to rescind?
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 a Conventional Cash-Out Refinance Leave You With Thin Equity? · How Much Equity a Conventional Cash-Out Refinance Lets You Borrow · How Much You Can Borrow With a Conventional Cash-Out Refinance?
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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.