The Quick Read: A conventional lender will let you borrow against a vacation home, but it sets a lower ceiling than it does on the home you live in. On a one-unit vacation home, the new loan generally tops out at 75% of the appraised value, compared with 80% on a one-unit primary residence. That ceiling covers the whole new loan, not just the cash you receive. Seasoning, occupancy, reserves and debt ratios can each stop a file before leverage does.
Key Takeaways
- A vacation home is a “second home” to a lender. That label sets the leverage cap, the pricing and the reserves.
- The 75% cap applies to the total new loan. Your payoff, closing costs and any other liens come out of that room first.
- You generally need 6 months on title, and the loan being paid off must be at least 12 months old.
- Renting the place out can change its classification. A property run as a rental is underwritten as an investment property.
- Taking the maximum is a choice, not a requirement. Borrowing less keeps more equity in the house.
Which Loan Do You Mean?
Two different loans get called “cash-out on a vacation home,” and mixing them up wastes a lot of time. This article covers the first one.
1. Cash-out refinance on the vacation home itself. You own it, you want to pull equity out of it, and the vacation home is the collateral.
2. Cash-out refinance on your primary home to fund a vacation home purchase. The primary home is the collateral. The vacation home gets its own loan, its own appraisal and its own approval.
If your plan is the second one, the primary-home limits apply to the first loan. The usual cap is 80% on a one-unit primary residence. Lendmire’s cash-out refinance programs page lays out that lane.
For the first path, keep reading. The details below come from how these files work across the wholesale conventional programs Lendmire arranges loans through, which is the same envelope most conforming lenders work within. Every figure is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
How the Leverage Limit Works
On a one-unit vacation home, a conventional cash-out refinance caps at 75% loan-to-value. Loan-to-value (LTV) is the new loan balance divided by the appraised value. Lenders use a lower number on second homes because a vacation home is the first property people stop paying on when money gets tight. Lower leverage means more of your own equity stays in the property.
Here is how the cap compares across occupancy types on a conventional cash-out:
| Property and use | Cash-out LTV cap |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home (vacation home) | 75% |
| Investment property | 75% |
The same property gets a much higher cap if you are buying it or doing a no-cash-out refinance. A second home reaches 90% on a purchase. That gap shows how much the lender discounts cash coming out.
The Fannie Mae Eligibility Matrix is the agency document that sets these caps. It is built into the agency’s Selling Guide, so it governs any loan sold to Fannie Mae. The exact limits vary by occupancy and transaction type, so check your lender’s current figure rather than relying on a general summary.
Pricing moves the same direction. A second home carries an adjustment. A cash-out carries another. They stack, so a vacation-home cash-out costs more than a primary-home cash-out at the same credit profile. The exact amounts depend on credit score and leverage, and they show up on your Loan Estimate.
A Worked Example in Percentages
The cap applies to the total new loan. This is where borrowers get surprised, so run it in percentages of value.
Say your lender’s appraisal confirms the value you expected. Call that 100%. The cap is 75%, so the new loan can reach 75% of value.
Now subtract what the new loan must do:
- Pay off the existing first mortgage. Say that balance is 60% of value.
- Pay closing costs. These come out of the same room, or you bring cash.
- Pay off any other lien. A forgotten home equity line counts here.
Starting with 15 percentage points of value between the payoff and the cap, your cash back is that gap minus closing costs. Closing costs vary by loan and file, so your Loan Estimate shows the real number.
Now try a low appraisal. Say the appraisal comes in 10% under what you expected. Value falls to 90% of your original figure. The 75% cap now lands at 67.5% of the original figure. Your payoff is still 60%. The room drops from 15 points to 7.5, and closing costs still come out of it.
That is the lesson. A small drop in appraised value hits cash back twice as hard as it looks, because the cap shrinks while the payoff stays put.
One more detail. Value on a refinance starts with an estimate, but the appraisal sets the number the cap is applied to. Plan on the appraisal, not on the Zillow figure.
The Gates Beyond Leverage
Leverage is only one limit. A vacation-home cash-out has to clear several gates, and any one can stop the file.
| Gate | What the lender checks |
|---|---|
| Title seasoning | At least 6 months on title for a borrower |
| Loan age | Loan being paid off is at least 12 months old |
| Occupancy | Suitable for year-round use, borrower in control |
| Credit | 620 wholesale floor; many lenders set higher |
| Debt ratio | Automated findings allow up to 50% total ratio |
| Reserves | Cash left after closing, across all properties |
| Property type | One-unit site-built is the easy case |
Seasoning has two clocks. Across the wholesale programs these files go through, at least one borrower must have been on title for 6 months. The first mortgage being paid off must also be at least 12 months old, counted from note date to note date. Exceptions exist for inheritance, a legal award in a divorce, and delayed financing. The Fannie Mae Selling Guide’s cash-out section governs the current rules for loans sold to that agency. An older archived edition of the same section also shows that time held in a majority-owned LLC or a revocable trust can count. If an LLC holds title, the property has to transfer to you personally at closing.
Credit and debt ratio. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files, with a total ratio ceiling of 50%. Your total ratio counts both housing payments, the vacation home and the primary residence. That is why a clean primary-home budget can still fail once the second mortgage is added.
Reserves. Reserves are cash or liquid assets you still hold after closing. A second home requires them. A cash-out with a high debt ratio calls for a bigger cushion. Owning several financed properties adds more. The agency’s reserve rules also subtract your cash to close from available assets before counting reserves, so don’t count the same money twice.
Loan size. Conforming loan limits vary by county. A vacation home in a high-cost area can push past the conforming line. When it does, jumbo programs take over with their own rules.
Rental Use and Reclassification
Can you rent it out and still call it a second home? Sometimes. A second home must be suitable for year-round occupancy, and you must have exclusive control of it. The agency’s occupancy rules say so directly.
The practical line looks like this:
- Occasional rental, you stay in control. The loan can still be a second home. Rental income can be disclosed, but it cannot be used to qualify.
- Rental pool or manager controls occupancy. That generally disqualifies it as a second home.
- The place is really a rental. If it is run as a rental property, it is underwritten as an investment property, with different leverage and pricing.
Occupancy is the one question where people shade the truth, and underwriters know it. The pricing gap between occupancy types is the temptation. Proximity to your primary home gets a closer look, too, because a “vacation home” ten minutes from your front door raises obvious questions. Misrepresenting occupancy on a loan application is a serious problem, so describe the property as it is actually used.
Existing Liens and Combined Leverage
The 75% cap counts every lien against the property. If you have a first mortgage and an open home equity line, the combined balance matters, and lenders commonly count the full credit limit of the line, not just what you have drawn.
Here is a pattern that comes up on these files. A borrower sees a paid-down first mortgage and assumes plenty of room. Then a home equity line opened years ago eats a chunk of the cap. The new loan must pay that line off, or the line must be subordinated, and the file only works if the combined number still fits.
Before you apply, pull every statement on the property. Know every balance and every credit limit.
Edge Cases Where the Rule Bends or Breaks
The 75% cap and the gates above cover the typical one-unit, site-built vacation home. These cases change the picture:
- Delayed financing. A cash buyer can take cash out inside the 6-month window under a documented exception. It is still priced and capped as a cash-out, and the new loan is generally tied to what you documented putting in.
- Inheritance or divorce award. No waiting period applies to a home you received this way.
- Listed for sale. A property on the market must be taken off by the time the loan funds.
- Manufactured homes. Second-home eligibility exists, but the cash-out rules differ from site-built homes. Don’t assume the 75% cap carries over.
- Co-op shares. Cash-out refinances on second-home co-ops are not permitted.
- PACE loans. A borrower with enough equity to pay off a PACE assessment but choosing not to may be ineligible for cash-out.
- Past-due property taxes. Treatment varies by lender and situation, so confirm the details with your lender and a qualified local tax professional.
- Temporary buydowns. A loan with a temporary interest-rate buydown is an ineligible cash-out transaction.
- Multiple financed properties. More financed homes mean more reserves, and the number of properties you can carry is limited.
Some lenders also set their own limits above the agency minimums. A higher credit floor or a lower cap is possible. Treat any agency summary as the starting line, not the finish.
Using Your Primary Home to Buy the Vacation Home
This is the other path from the fork at the top. You cash out on the home you live in, then use the money for a down payment or the full price on a vacation home.
The vacation home still needs its own loan if you finance any of it. It gets its own appraisal and its own approval, and both mortgage payments count against your debt ratio. Cash-out on the primary home lands at 80% LTV on a one-unit residence. That tends to leave more cash available than a cash-out on the vacation home itself would. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Take the Maximum or Borrow Less?
You are allowed to borrow less than the cap. That is often the smarter move. Here is the tradeoff, laid out honestly.
Taking the maximum puts the most cash in your hand. It also means:
- a larger balance and typically a larger monthly payment,
- less equity cushion if values soften,
- pricing that rises as leverage climbs.
Borrowing less keeps the loan smaller and the equity thicker. The tradeoff is less cash now.
There is a third question that matters more than either: what are you replacing? A cash-out refinance replaces your existing first mortgage, as the Consumer Financial Protection Bureau’s research blog explains. A home equity loan or line sits behind it and leaves the first mortgage alone. If your current first mortgage has terms you like, a cash-out gives them up. It’s a genuine toss-up that depends on how much cash you need and how much you value your existing loan. Lendmire’s piece HELOC vs Cash-Out Refinance Costs and CLTV Limits on a Paid-Off Home compares the two structures side by side.
One more point on risk. You are putting a home up as collateral, and that includes a vacation home you may only use a few weeks a year. Pulling cash out to pay down other debt converts it into mortgage debt, and that puts the property at risk if you fall behind.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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. Bring your current statements, your best estimate of value, and a clear sense of how the property is used.
Key Terms Defined
Second home: A property you use personally for part of the year, which must be suitable for year-round occupancy and under your control. Lenders use this label for most vacation homes.
Loan-to-value (LTV): The loan balance divided by the appraised value, expressed as a percentage.
Combined loan-to-value (CLTV): The same ratio, but counting every loan secured by the property, including home equity lines.
Seasoning: The waiting time a lender wants, such as time on title or the age of the loan you are paying off.
Reserves: Cash or liquid assets you still have after closing, usually measured in months of your full housing payment.
Delayed financing: An exception that lets a cash buyer borrow against the property inside the normal waiting period.
Frequently Asked Questions
Can you do a cash-out refinance on a vacation home?
Yes, on a conventional loan, as long as it qualifies as a second home. The cap is lower than on a primary home, generally 75% of appraised value on a one-unit property. You also need to clear the seasoning, reserve and debt-ratio gates. Terms vary by lender and file.
How much cash can I actually get from my vacation home?
That depends on the appraisal, your payoff and your closing costs. Take the appraised value, multiply by the cap, then subtract your first mortgage, any other liens and costs. What’s left is your cash. A low appraisal shrinks the number faster than most people expect.
Do I have to own the vacation home for a certain time before I can cash out?
Generally, yes. At least one borrower needs 6 months on title, and the loan being paid off needs to be at least 12 months old. Exceptions apply for inheritance, divorce awards and delayed financing. Your lender confirms which version applies to your file.
Will renting out my vacation home change how it’s financed?
Yes, it can. Occasional rental use may be disclosed and the property can stay a second home, though the rental income cannot be used to qualify. If a manager or rental pool controls occupancy, or the place operates as a rental, it is underwritten as an investment property.
Is a cash-out refinance better than a home equity line for a vacation home?
It depends on what you want to keep. A cash-out replaces your first mortgage, so it works better when your current loan has no special value to you. A home equity line leaves the first loan in place. Compare the full structure and costs on each Loan Estimate before choosing.
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 Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Selling Guide B3-4.1-01, Minimum Reserve Requirements
4. Fannie Mae Selling Guide B2-1.1-01, Occupancy Types
5. Consumer Financial Protection Bureau’s research blog
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: 5 Myths About Qualifying for a Conventional Cash-Out Refinance · Conventional Cash-Out Refinance Limits for a Large Loan · How Much Cash a Conventional Cash-Out Refinance Should Release
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.