The Quick Read: A cash-out refinance replaces your current mortgage with a larger one and pays you the difference. On a one-unit home, conventional programs generally let you borrow up to 80% of the home’s value. The 12-month seasoning rule and the 6-month title rule decide whether you can start. Closing costs are real, but no agency publishes a standard percentage, so your Loan Estimate is the only number that counts.
What Is a Cash-Out Refinance on a Family Home?
A cash-out refinance pays off your existing first mortgage with a new, larger loan. The leftover money comes to you. The new rate and term apply to the whole balance, not just the cash portion. The federal consumer-finance regulator’s home equity guide says the new loan may stretch out your payoff time and raise your monthly payment, because you are replacing the mortgage with a bigger one.
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.
Here is the simple flow of money:
1. The lender sets the maximum new loan from your appraised value and the program’s leverage cap.
2. The new loan pays off the old first mortgage and any liens that must be cleared.
3. Financed closing costs come out of the same loan.
4. Whatever remains is your cash.
A paid-off home counts too. Taking a new loan on a home you own free and clear is still a cash-out transaction, per the Fannie Mae Selling Guide. Lendmire’s cash-out refinance programs page covers how Lendmire, a mortgage broker, arranges these loans through wholesale lenders.
Key Terms Defined
- Seasoning: the minimum time you must have held the old loan or the title before a cash-out is allowed.
- LTV (loan-to-value): the new loan amount divided by the home’s appraised value.
- Cash-out versus limited cash-out: a limited cash-out (often called rate-and-term) pays off the old loan and costs, with only small incidental cash back.
- Closing costs: the upfront charges to get the loan and transfer or record ownership.
- Estimated Cash to Close: the line on your Loan Estimate showing what you must bring to the table.
- Adjusted Value: the figure HUD uses to cap FHA cash-out loans.
What Are the Core Cash-Out Refinance Requirements?
Five things decide most files: equity, seasoning, credit, debt load and the appraisal. Each program sets its own numbers, and all of them are subject to lender guidelines and full file review.
Equity. On a conventional loan, the limit is 80% LTV on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property are written at 75%. Occupancy sets the leverage; it does not by itself rule you out. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution.
Seasoning. The first mortgage being paid off must be at least 12 months old, measured from the old note date to the new note date. At least one borrower must have been on title for six months. The Selling Guide lists exceptions, including delayed financing for cash buyers, inheritance, and legal awards. The 12-month rule is waived when you buy out a co-owner under a legal agreement.
Credit. The wholesale conventional programs we place files with start at a 620 decision score. The automated underwriting finding governs most files, and the total debt ratio tops out at 50%. Manually underwritten loans use 36% or 45%, depending on score and reserves. Fannie Mae also asks for six months of reserves on automated files with a ratio above 45%.
Appraisal. The appraised value drives the cap. A low appraisal shrinks your cash dollar for dollar at the same leverage.
Credit events. Agency waiting periods apply: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
How Do Conventional, FHA and VA Cash-Out Rules Differ?
Conventional loans reach 80% on a one-unit primary home. FHA is also capped at 80%, and VA allows far higher leverage with lender-set limits. Details differ enough that the program often decides the answer.
| Factor | Conventional | FHA | VA |
|---|---|---|---|
| Leverage cap | 80% one-unit primary | 80% of Adjusted Value | Very high; lenders set lower |
| Occupancy | Primary, second home, investment | Owner-occupied primary | You must live there |
| Seasoning | 12-month loan, 6-month title | Track record of owning and living there | Set by lender and VA rules |
| Extra cost | Pricing adjustments by LTV and score | Mortgage insurance | Funding fee unless exempt |
On FHA, HUD Mortgagee Letter 2019-11 cut the cash-out cap from 85% to 80% to reduce risk to the FHA Insurance Fund. HUD Handbook 4000.1 carries the change. Older articles that still say 85% are out of date.
On VA, VA.gov explains that you need a Certificate of Eligibility, must live in the home, and work through a private lender, who orders the appraisal. A VA cash-out can also move a non-VA loan into a VA-backed one. A funding fee applies unless you are exempt, and it runs higher for repeat use.
What About Mortgage Insurance on a Cash-Out?
Conventional mortgage insurance is required above 80% LTV on the agency path, and the standard cash-out cap sits right at 80%. That means most conventional cash-outs carry none. There is one more exception worth knowing. Across the wholesale programs Lendmire places files with, one lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% ratio on a thirty-year fixed primary residence at a conforming balance, plus six months of seasoning. It is not written in Texas. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
If you do carry insurance, you may request cancellation at 80% of the original value with a good payment history, no subordinate liens, and no drop in value. The servicer must end it automatically at 78%. The conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is a program-sheet range, not a quote.
What Do Cash-Out Closing Costs Typically Include?
Closing costs cover the lender’s charges, third-party services, and government recording fees. No agency or regulator publishes a verified typical percentage for cash-out loans, so treat any single “average” skeptically. Costs also vary by lender, state, and county.
| Cost category | Who charges it | What it pays for |
|---|---|---|
| Lender and origination | The lender | Processing and underwriting the loan |
| Appraisal | Appraiser | Setting the value that caps your loan |
| Credit report | Reporting agency | Pulling your credit history |
| Title search and insurance | Title company | Confirming clear ownership |
| Recording and transfer charges | Local government | Filing the new mortgage |
| Prepaids and escrow deposits | You, held in escrow | Taxes and insurance, not true fees |
Keep the last row separate in your head. Prepaids fund your tax and insurance escrow, and your old servicer refunds the old escrow balance. They feel like costs at the table, but they are not fees for the loan itself.
Pricing is another layer. Fannie Mae applies loan-level price adjustments based on LTV and credit score, and Freddie Mac applies a cash-out credit fee. That is why a cash-out generally prices higher than a plain rate-and-term refinance. Both agencies waive their cash-out add-on in narrow cases, such as a Freddie Mac co-owner buyout or a Fannie Mae student loan payoff.
How Do You Pay for the Closing Costs?
You have three choices: pay cash at closing, roll the costs into the loan, or let them reduce your proceeds. Rolling them in raises the balance. Paying from proceeds shrinks your check. Paying cash keeps both clean but needs money up front.
On your Loan Estimate, find two lines: Total Closing Costs and Closing Costs Financed. The CFPB’s Loan Estimate explainer walks through them, and the Estimated Cash to Close line tells you what to bring.
Be wary of the phrase “no-closing-cost” refinance. HUD notes some such offers simply carry a higher interest rate in exchange for no out-of-pocket expense. The costs still exist; they move into the rate or the balance. Compare offers on a like-for-like basis before you decide.
A quick test for any option: divide your total costs by the monthly savings or benefit you expect. If you may sell or refinance again before that point, the extra cost may not pay back.
How Does a Net Proceeds Walk-Through Work?
Take a home appraised at a round value and a conventional one-unit primary residence capped at 80% LTV. The maximum new loan is 80% of the appraisal. Subtract your old payoff, any liens that must be cleared, and financed closing costs. What is left is your cash. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Two things shrink that cash. A low appraisal lowers the cap. High closing costs lower the remainder. Because the cap applies to the whole new loan, not just the cash portion, a large existing balance leaves little room. A homeowner with a big mortgage and modest equity may find the cash slice thin once costs come out.
How Do Family and Ownership Situations Change Things?
Ownership structure matters more than most guides admit. Occupancy and who is on the loan can change both leverage and eligibility.
- Co-owner buyouts. Divorce, inheritance, and family splits are common. Fannie Mae waives the 12-month first-mortgage seasoning when you buy out a co-owner under a legal agreement. Freddie Mac has a special purpose cash-out, and under it the borrower keeping the home may not receive any proceeds. Both agencies treat the buyout as limited cash-out. A written agreement and occupancy evidence are required.
- Inherited homes. The 6-month title rule has an inheritance exception, so a new owner does not always have to wait.
- Student loan cash-out. Fannie Mae waives the cash-out price adjustment but caps cash back at the greater of 1% of the new loan or $2,000.
- Second homes and rentals. One sentence settles it: occupancy sets the leverage, 80% on a one-unit primary and 75% on the others.
Where Does the General Rule Break?
A few situations catch people off guard. Short answer: streamlines are not cash-out, free-and-clear homes are, and some “refinances with cash back” are not cash-out at all.
- Streamlines pay no cash. An FHA Streamline allows no more than $500 in cash, per HUD. The VA IRRRL works only with an existing VA loan.
- Limited cash-out is a different bucket. Fannie Mae allows incidental cash back of the lesser of 2% of the new loan or $2,000. This is rate-and-term, not cash-out, and it prices differently.
- Listed homes. A property listed for sale must be off the market on or before the disbursement date.
- High-LTV refinance. Fannie Mae’s program for high-LTV borrowers is not cash-out, and acquisition is currently paused.
When Is a Cash-Out the Wrong Move?
If your current first mortgage is favorable, a cash-out replaces the entire balance with new terms. A second-lien product may fit better. If you are paying off cards, the CFPB’s research on cash-out borrowers found scores rose at first and then slipped, and card balances drifted back within a year. You move unsecured debt onto the house, which puts the home at risk if payments slip.
What Does the Process Look Like?
1. Gather documents. Pay stubs, tax returns, bank statements, and your current mortgage statement.
2. Apply and receive a Loan Estimate. Check costs and Estimated Cash to Close.
3. Underwriting and appraisal. The lender reviews credit, income, assets, and value.
4. Review the Closing Disclosure. Compare it to your Loan Estimate. The CFPB advises asking the lender to explain any significant change or new service.
5. Funding. The new loan pays off the old one, and you receive what remains.
Common reasons files get cut back: a low appraisal, a debt ratio over the limit, or a title problem.
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
How long do I have to own my home before a cash-out refinance?
At least one borrower generally needs six months on title, and the first mortgage being paid off must be 12 months old. Exceptions cover delayed financing, inheritance, and legal awards. Subject to lender guidelines.
Can I take out all my equity?
No. Conventional cash-out leverage tops out at 80% on a one-unit primary home, and FHA is also capped at 80%. The leftover equity is your cushion.
Are closing costs higher on a cash-out than a regular refinance?
Often, yes, because of pricing adjustments tied to LTV and credit score. Third-party fees such as appraisal and title look similar. Your Loan Estimate shows the real totals.
Can I use a streamline to get cash?
No. An FHA Streamline limits cash to $500, and the VA IRRRL requires an existing VA loan. Cash-out is a separate product.
What credit score do I need?
The wholesale conventional programs start at a 620 decision score, and the no-mortgage-insurance lane asks for 680. Final eligibility depends on the full file and lender guidelines, and none of this is a commitment to lend.
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. CFPB, Using Home Equity guide
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. HUD Mortgagee Letter 2019-11
4. HUD Handbook 4000.1 Transmittal
5. VA.gov
6. CFPB’s Loan Estimate explainer
7. HUD
8. CFPB’s research on cash-out borrowers
9. CFPB
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 Requirements for a First-Time Refinancer · Cash-Out Refinance Lenders to Fund Home Improvements With Home Equity · Best Cash-Out Refinance Program Without Paying Upfront for the Home Appraisal
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
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.