The Quick Read: Yes, in nearly every case. A conventional cash-out refinance caps the new loan at a share of the appraised value, so some equity always stays in the home. On a one-unit primary residence that cap is 80% LTV (loan-to-value, the loan as a percentage of the home’s value). The cap is a program rule, not a law, and it changes with the property type and the loan program. Subject to lender guidelines and full file review.
Who Sets the Equity Rule?
The equity rule comes from the loan program, not from the government. Fannie Mae and Freddie Mac, the two agencies that buy most conventional loans, set the maximum LTV. Lenders may add stricter limits of their own. Nothing in federal law says you must leave a set amount in the house.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.24% as of October 29, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
One exception is in the state constitution. In Texas, a cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution. Lenders in other states follow program rules instead.
Freddie Mac defines the product plainly: a cash-out refinance has no specific restrictions on how you use the proceeds. The equity cap is the main thing that limits how much you take.
Here is the short version in a table:
| Question | Answer |
|---|---|
| Who sets the floor? | The loan program (and sometimes the lender) |
| What does it control? | The maximum new loan, as a % of appraised value |
| Does it vary? | Yes, by property type and program |
| Is it a law? | Not generally; Texas homesteads are the exception |
Why Do Lenders Make You Keep Equity?
Equity is the lender’s cushion. If home values dip or you fall behind, the house still has to cover the loan. A borrower with a thin cushion is a bigger risk, so the program limits how much you can pull out.
Think of it as a buffer against a bad market. The lender sizes your loan from the appraised value, not from what you paid or what you think the home is worth. A low appraisal shrinks the cap, and the cash you can take shrinks with it.
How Does the Equity Cap Become Your Cash-Out Amount?
Your cash-out is the maximum new loan minus what the new loan must pay off. Walk through it in four steps:
1. Take the appraised value.
2. Multiply by the program’s LTV cap.
3. Subtract your current mortgage payoff and any second lien.
4. Subtract closing costs if they are rolled into the loan. What remains is your cash.
Run it in percentages. Say a home appraises at 100% of value and your payoff is 50% of that value. At an 80% cap, the new loan can reach 80%. That leaves a gap of 30 points of value, before costs. The home still carries 20% equity afterward.
Closing costs matter here. When you roll costs into the new loan, they use up part of the room under the cap. Your net cash is smaller than the gross figure. A second lien, like a home equity line, must also be paid off in the same transaction. It counts against the same cap.
This is why a low appraisal hurts. If the appraisal comes in 5% below your estimate, the cap shrinks by 5% of the home’s value times the LTV, and your cash drops by that amount.
Does the Equity Rule Change by Loan Type or Property?
Yes. Occupancy and unit count set the leverage. Across the wholesale programs I place files with, these are the conventional cash-out limits:
| Property | Max LTV (cash-out) |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
| Investment property | 75% |
A cash-out can be written on a primary residence, a second home, or an investment property. Occupancy decides the leverage, and the rental side is a topic for another day.
Freddie Mac’s own cash-out product page says maximum LTV follows its Guide, with separate rules for super conforming loans. The numbers step down by occupancy and unit count.
A wholesale exception exists. One 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 and a conforming loan balance. It carries its own six months of seasoning. It is not written in Texas. Here’s the catch: it is narrow, so most borrowers will not fit it.
Mortgage insurance is the other piece. On the agency path it applies above 80% LTV, and the no-MI lane above is the one exception. Because standard cash-out stops at 80%, most cash-out loans never need mortgage insurance at all. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Government programs work differently. The FHA Streamline and the VA IRRRL are for people who already hold an FHA or VA loan. They are rate-and-term products, not cash-out. The FHA Streamline needs no appraisal and only a limited credit review, plus a net tangible benefit. The VA IRRRL carries a 0.5% funding fee unless exempt and needs no VA appraisal. Neither lets you pull meaningful cash out.
VA and FHA cash-out loans exist as separate products with their own limits. Those limits differ from conventional, so borrowers should check them against current HUD and VA guidance before relying on any figure.
Are There Other Rules Besides Equity?
Yes. Equity is the headline, but it is not the only gate. Four others matter.
Seasoning. Seasoning is a waiting period. The mortgage being paid off must be at least 12 months old, counted note date to note date. At least one borrower must also have been on title for six months. Exceptions cover delayed financing (a recent cash purchase), inheritance and legal awards. Freddie Mac lists the title rule and its exceptions.
Credit. The wholesale conventional programs start at a 620 decision score. An automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run at 36% or 45%, depending on reserves and score. After a credit event, agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Appraisal. The lender orders one. The value it reports drives everything above.
Pricing. Freddie Mac applies a credit fee built into pricing on cash-out loans. It is not billed on special purpose cash-out loans, such as buying out a co-owner. I’m describing mechanics, not quoting a price.
What If You Don’t Have Enough Equity?
You have four honest options.
- Take less cash. A smaller request may fit under the cap.
- Wait. Paying down the balance or letting value rise rebuilds the cushion.
- Add value. Improvements can raise the appraisal. Freddie Mac treats certain renovation loans as “no cash-out” when proceeds fund only eligible improvements.
- Choose a different product. A rate-and-term refinance changes the loan without pulling cash. It runs to 95% LTV on a one-unit principal residence, and to 97% on the first-time-buyer programs where an agency already owns the loan. Only incidental cash comes back: Fannie Mae allows the lesser of 2% of the new loan or $2,000, and Freddie Mac the greater of 1% of the new loan or $2,000. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Lendmire’s cash-out refinance programs page lays out the equity each option reaches. A conversation with a broker is often faster than guessing at the math.
Is It Worth Cashing Out When You’d Have Little Left?
Sometimes it is not. Qualifying and benefiting are two different things. A cash-out replaces your existing mortgage. The new loan is bigger. Its payment, term and closing costs all reset.
Ask three questions before you proceed:
1. After costs, is the net cash enough to justify the reset?
2. Is the loan you hold now better than a new one in some way?
3. Do you need a lump sum at all?
If the second question gives you pause, a home equity loan or line of credit may fit better. Those leave your first mortgage alone.
This one’s a toss-up for many owners. A cash-out can consolidate costly debt, but it also turns unsecured debt into debt secured by your home. Treat that tradeoff seriously.
Does the Equity Come Back After You Cash Out?
Partly, over time. Two things rebuild it: paying down principal and a rising home value. Each month’s payment trims the balance. Appreciation can add to the cushion.
The risk runs the other way. If values fall, a thin cushion can disappear. You then owe more than the home is worth, which makes a later sale or refinance harder. Mortgage insurance matters here too. On loans above 80% LTV, you can request cancellation at 80% of the original value with a good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%, under the Homeowners Protection Act. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Common Misconceptions
“If I own the home outright, it isn’t cash-out.” It is. Freddie Mac counts a new loan on a free-and-clear property as cash-out.
“I can borrow 100% of my equity.” Standard conventional cash-out stops well short of that.
“A streamline lets me pull cash out.” Streamlines are no-cash-out products.
“The cap applies to what I paid.” It applies to the appraised value today.
“I’m limited in how I can spend it.” The proceeds carry no specific use restrictions under Freddie Mac’s rules.
Key Terms Defined
LTV (loan-to-value): The loan amount as a percentage of the home’s appraised value.
Seasoning: The waiting period before you can refinance or cash out.
Rate-and-term refinance: A refinance that changes the rate or term and returns only incidental cash.
Appraised value: The value an appraiser assigns, which sets the loan cap.
Mortgage insurance: Coverage the borrower pays for that protects the lender when the loan exceeds 80% LTV. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Frequently Asked Questions
Can I take out all my equity in a cash-out refinance?
No. Conventional programs cap the new loan at a share of the appraised value. On a one-unit primary residence that share is 80% LTV, so about 20% stays in the home. Other property types sit lower, at 75%. Subject to lender guidelines.
Is the equity requirement a law?
Generally no. It is a loan program rule set by the agencies and lenders. The Texas homestead cap of 80% is the exception, set by the state constitution.
Do closing costs count against my equity?
When you roll costs into the new loan, they use part of the room under the cap. That cuts your net cash. Paying them out of pocket leaves more room.
Can a low appraisal block my cash-out?
It can shrink it or end it. The lender sizes the loan from the appraised value, so a lower number lowers the cap and the cash. A very low value might leave nothing to take.
Do I have to wait before cashing out?
Usually. The mortgage you are paying off must be at least 12 months old, and one borrower must have been on title for six months. Exceptions exist for delayed financing, inheritance and legal awards.
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 your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Freddie Mac Seller/Servicer Guide §4301.5
2. Freddie Mac Cash-out Refinance product page
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-Out Refinance Lenders Without an Appraisal and With Over 40 Percent Equity · Cash-Out Refinance Lenders to Fund Home Improvements With Home Equity · Best Cash-Out Refinance Program When Ending a Home Equity Investment Early
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.