The Quick Read: The cash you receive is the new loan minus everything it has to pay off. On a one-unit primary residence, the new loan tops out at 80% of the appraised value, subject to lender guidelines. Subtract your existing mortgage, any second liens, and the costs you roll in. What remains is your cash. The ceiling follows the appraisal, not the price you paid.
Key Takeaways
- The 80% cap limits the new loan, not the cash. Your payoff comes out first.
- The appraisal sets the base. A lower appraisal shrinks the cap and the cash together.
- A second lien that stays in place counts against the same 80%.
- Costs you roll into the loan reduce your net cash. Costs you pay out of pocket do not.
- Borrowing less than the ceiling is allowed, and often wise.
The Formula in One Line
Here is the whole calculation in one block. Appraised value × 80% = the maximum new loan. Subtract the first mortgage payoff. Subtract any second liens you must pay off. Subtract closing costs, points and prepaid items you roll into the loan. The remainder is your cash.
The $400K in the title is the value we are using for every example. Rather than multiply out dollar figures, the examples below use percentages of the home’s value. That keeps the logic clear and holds for any price. Run the same steps on your own appraisal.
Across the wholesale programs I place files with, this is the chain every cash-out file follows. Lenders check the loan-to-value ratio, which is the new loan divided by the appraised value. Then they check your credit and ratios. For a closer look at the product, see Lendmire’s cash-out refinance programs.
Key Terms Defined
Appraised value: the value a licensed appraiser puts on your home. The lender uses it, not your estimate or an online figure.
Loan-to-value (LTV): the loan balance divided by the home’s value, shown as a percentage. An 80% LTV means the loan equals 80% of value. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Equity: the home’s value minus what you owe. Equity is not the same as cash you can take out.
Payoff: the balance the closing agent sends to your current lender to retire the old loan.
Financed costs: closing costs, points and prepaid items added to the new loan instead of paid in cash.
Limited cash-out refinance: a refinance that pays off the existing loan and costs, with only a small amount of cash back. Lenders also call it a rate-and-term refinance.
Where the 80% Comes From
For a one-unit primary residence, a conventional cash-out refinance caps at 80% LTV. That means the new loan can be 80% of the appraised value. The same limit applies to the combined ratio when a second lien stays in place. The Fannie Mae Eligibility Matrix sets the cap, and Freddie Mac’s Guide Section 4301.5 covers the matching cash-out rules.
Two- to four-unit principal residences, second homes and investment property drop to 75%. Occupancy decides the leverage.
Conforming loan limits are not the constraint on a home this size. An 80% loan on a $400K house sits far below the one-unit limit, so the cap that matters is the LTV.
The $400K Math, Itemized
Picture a homeowner whose home appraises right at $400K. The ceiling is 80% of value. Here is how the cash changes as the existing mortgage changes. All amounts are percentages of the appraised value, and every row is a modeled scenario.
| Existing first mortgage | Max new loan | Gross room for cash |
|---|---|---|
| 30% of value | 80% of value | 50% of value |
| 50% of value | 80% of value | 30% of value |
| 60% of value | 80% of value | 20% of value |
| 70% of value | 80% of value | 10% of value |
| 78% of value | 80% of value | 2% of value |
“Gross room” is before costs. Subtract the closing costs and prepaids you roll into the loan to get net cash. If you pay those costs in cash at closing instead, your net cash from the loan is the full gross room, but you hand over money at the table. Either way, the Loan Estimate and Closing Disclosure show your cash to or from you.
Look at the last row. A homeowner who owes 78% has plenty of equity on paper. The cash is thin because the cap leaves only a sliver. That is the gap between equity and releasable cash.
Equity Is Not Cash
Equity is value minus debt. Releasable cash is the cap minus debt, minus costs. The cap leaves at least 20% of the home’s value untouched, so you never get to pull out all your equity.
Say you owe 20% of value. Your equity is 80%, but your gross room is 60%, not 80%. The lender keeps its cushion. The Consumer Financial Protection Bureau notes that lenders typically require you to keep an equity cushion on cash-out loans, which fits the 80% cap.
A common mistake is to think the 80% is the share of your home you can turn into cash. It is the ceiling on the whole new loan. Your payoff has to fit under it first.
What Shrinks Your Cash
A lower appraisal
The appraisal is the swing factor. Consider a home you expected to appraise at 100% of your estimate, with a first mortgage at 50% of that value. If the appraiser comes in 5% lower, every number moves.
| Appraisal vs. your estimate | Max new loan | Gross room (50% payoff) |
|---|---|---|
| 100% | 80% of estimate | 30% of estimate |
| 95% | 76% of estimate | 26% of estimate |
| 90% | 72% of estimate | 22% of estimate |
A 10% appraisal miss cuts the cash by more than a quarter. Your payoff does not move, so the cap absorbs the whole hit. Both agencies have appraisal-waiver pathways for some loans, but a waiver may or may not be available on a cash-out file. Do not plan around one.
A second lien or HELOC
A home equity line or second mortgage counts toward the combined ratio. Suppose the first mortgage is 40% of value and a HELOC is 15%. Your combined debt is 55%, which leaves 25% of value under the cap. You can pay the second lien off through the cash-out, and the Fannie Mae Selling Guide allows a subordinate lien of any age to be paid this way. The payoff comes out of your gross room either way. If the HELOC stays open, it still eats cap space.
Costs rolled in
Appraisal, title, lender fees and prepaid items vary by file. Rolling them in keeps cash in your pocket at closing but raises the loan balance. The Selling Guide lists the existing first mortgage, closing costs, points, prepaids, real estate taxes and subordinate liens among the things the new loan may pay.
Pricing that rises with leverage
Cash-out loans carry loan-level price adjustments tied to LTV and credit score. In plain terms, borrowing near the ceiling costs more than borrowing well under it. These adjustments are built into the loan terms. I will not quote any pricing here, because it depends on your file.
Full Cash-Out vs. Limited Cash-Out
A refinance that pays off your first mortgage, your costs and a purchase-money second lien, with only incidental cash back, is a limited cash-out refinance. Across the wholesale programs we place files with, it carries much higher leverage: 95% LTV on a one-unit principal residence, and 97% where the existing loan is agency-owned and the first-time-buyer program applies. Mortgage insurance applies above 80%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The tradeoff is cash. If you take real cash, or pay off cards, a car loan or another debt, it becomes a full cash-out and the 80% cap applies.
This matters for the homeowner who owes close to the cap. Someone who owes 85% of value cannot do a full cash-out at all. A limited cash-out might still lower the term or restructure the loan, but it will not hand over meaningful cash.
Where the 80% Rule Bends
The general answer holds for most one-unit primary residences. These situations change it:
- Two to four units, second homes, investment property: 75% LTV.
- Manufactured homes: eligibility and leverage depend on the lender and program, and some single-width homes may be limited or ineligible.
- Free-and-clear homes: a refinance of a home with no mortgage is still a cash-out, even though no loan is being paid off.
- The 89.99% lane: a wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a 30-year fixed rate, a primary residence, a conforming balance and its own six months of seasoning. It is not written in Texas, where the state constitution caps a homestead cash-out at the agency figure.
- Texas and state rules: some states add their own limits on cash-out, so state law can change your options.
- Other programs: FHA, VA and jumbo cash-out follow different leverage rules and are outside this article. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Can You Cash Out Yet?
Cash-out has waiting periods. The mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must also have been on title for six months. The Selling Guide describes the delayed financing exception for cash buyers, though that version is archived, so rules may have changed. Inheritance and legal-award exceptions also exist.
Occupancy matters too. On a primary-residence cash-out, Freddie Mac requires all borrowers to live in the home. Credit and ratios come next. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%. Reserves can come into play when ratios run higher. Loan age, time on title and occupancy are what most often delay a file.
After the Cash Arrives
A bigger loan usually means a larger monthly payment, even if the new terms look better. The loan can also take longer to pay off, and the clock on interest restarts. The Federal Reserve’s refinancing guide cautions that refinancing late in a mortgage resets amortization, so more of each payment goes to interest again.
Consider a homeowner who wants to clear credit cards. Swapping card balances for a larger mortgage can cut the monthly outflow on paper. But the cards are now secured by the home, and the payoff stretches across the full new loan term. The same Federal Reserve guide cautions against using a cash-out refinance to pay down short-term debt. If the spending habit that built the balances continues, the cards can fill up again on top of a bigger mortgage.
Should you take the maximum? Often the answer is no. Borrow what the project needs, and leave margin for a low appraisal or a dip in value. Staying below the ceiling also tends to cost less, since pricing rises with leverage. Mortgage insurance is not a factor under the 80% cap. If you later refinance above 80%, it comes in, and it cancels on request at 80% of the original value and must end at 78%.
Frequently Asked Questions
How much cash can I get from a cash-out refinance on a $400K home?
It depends on your payoff and costs. The new loan caps at 80% of the appraised value on a one-unit primary residence. Subtract your mortgage, any second liens and rolled-in costs. A homeowner who owes half the value has about 30% of the value in gross room, before costs.
How much equity do I have to leave in the home?
At least 20% of the appraised value on a one-unit primary residence. On two- to four-unit homes, second homes and investment property, you leave at least 25%. Any second lien that stays open counts toward that cushion.
Do closing costs come out of my cash?
Yes, they can. If you roll costs into the new loan, they reduce your net cash and raise your balance. If you pay them at closing, your loan proceeds stay whole, but you spend cash up front. The Loan Estimate shows which one applies to you.
What happens if the appraisal comes in low?
The cap drops with it, and your payoff does not. A 5% lower appraisal cuts the maximum loan from 80% to 76% of your original estimate, a drop of 4% of that value, and the whole amount comes out of your cash. A large miss can wipe out most of the gross room.
Does paying off credit cards count as a cash-out?
Yes. Paying off non-mortgage debt makes the loan a full cash-out, so the 80% cap applies. A limited cash-out allows only incidental cash back and the payoff of your first mortgage, costs and a purchase-money second lien.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire, a mortgage broker licensed for consumer lending in 16 states, can help you compare the programs and the equity each one reaches. Every program figure here is 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
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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. Freddie Mac Guide Section 4301.5, Cash-Out Refinance Mortgages
3. The Consumer Financial Protection Bureau
4. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
5. Fannie Mae Selling Guide B2-1.3-03 (archived version)
6. Federal Reserve, A Consumer’s Guide to Mortgage Refinancings
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Cash a Conventional Cash-Out Refinance Releases · How Much You Can Borrow With a Conventional Cash-Out Refinance? · Conventional Cash-Out Refinance Documents for a Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.