The Quick Read: A conventional cash-out refinance on a vacation home works when the property meets the agency definition of a second home. It must be a one-unit home you occupy part of the year, suitable for year-round use, and under your exclusive control. Leverage tops out at 75% of appraised value, below the 80% allowed on a primary residence. You also need 12 months of seasoning on the loan being paid off and 6 months on title, with a few named exceptions. Everything here is subject to lender guidelines and full file review.
Key Takeaways
- Second-home status comes first. If the property is really a rental, the loan terms change.
- The cash-out cap is 75% LTV, and the payoff of every lien comes out of that number first.
- The loan being refinanced must be at least 12 months old, and one borrower must have been on title for 6 months.
- The full payment on the vacation home counts in your debt ratios, because rental income cannot be used to qualify.
- Delayed financing, inheritance and legal awards can shorten the title clock. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
What Is a Conventional Cash-Out Refinance on a Vacation Home?
It is a new first mortgage that pays off your existing liens on the vacation home and hands you the leftover equity in cash. “Conventional” means the loan follows Fannie Mae or Freddie Mac guidelines. Lendmire arranges these through wholesale lenders in the 16 states where it is licensed for consumer lending, and the lender, not the broker, makes the credit decision.
The agencies call a vacation home a “second home.” That label is not automatic. Under the Fannie Mae Selling Guide, a second home must be a one-unit dwelling that you occupy for some part of the year. It must be suitable for year-round occupancy and under your exclusive control. It cannot be a timeshare or a rental arrangement.
Our cash-out refinance programs sit in the same family as the primary-residence version, but occupancy changes the leverage, the pricing and the reserves. You can see how Lendmire frames the product on its cash-out refinance programs page.
How Is the Loan Underwritten, Step by Step?
Across the wholesale programs we place files with, the sequence is consistent. Each step either confirms or removes the file from the second-home lane.
1. Classify the occupancy. You declare second home or investment property. That one answer drives the leverage cap, pricing and reserves.
2. Check seasoning. The lender confirms the 12-month and 6-month tests described below.
3. Run automated underwriting. Fannie Mae requires a second-home loan to receive an Approve/Eligible finding in Desktop Underwriter. Freddie Mac runs a parallel review. Most files are governed by that automated finding, with a total ratio ceiling of 50%.
4. Order the appraisal. Freddie Mac states that a cash-out refinance needs a new appraisal and inspection report. The appraised value becomes the base for the LTV math.
5. Apply the leverage cap. Take the appraised value, multiply by the cap, then subtract what must be paid off.
6. Check reserves and financed properties. Reserves are set by the automated finding, and owning other financed properties can add to them.
7. Review pricing and documents. Pricing adjustments rise with leverage and weaker credit. Cash-out files carry their own adjustment table, so the cost differs from a rate-and-term refinance.
On credit, the wholesale conventional programs start at a 620 decision score. Some lenders set a higher floor, and a stronger score generally improves pricing.
How Much Can You Borrow Against a Vacation Home?
The cap is 75% of appraised value. The Fannie Mae Eligibility Matrix lists second-home cash-out at 75%, and Freddie Mac Guide 4203.1 shows the same figure. Compare that with 80% for a one-unit primary residence, or 90% for a second-home purchase or limited cash-out refinance. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The 75% applies to the total loan, not to the cash you receive. Here is the order of operations, described without dollar amounts:
1. Start with the appraised value.
2. Multiply by 75% to get the maximum new loan.
3. Subtract the payoff of your existing first mortgage.
4. Subtract any second lien or HELOC being paid off.
5. Subtract closing costs and prepaids if you finance them.
6. What remains is your cash.
Say you own a vacation home with a first mortgage equal to about half its value. You might assume you can take out 25 points of equity. After costs and any HELOC payoff, the check is usually smaller. If a HELOC sits behind the first mortgage, lenders generally count the full credit line toward the combined ratio, whether or not you have drawn it.
A free-and-clear vacation home is a common surprise. A new mortgage on a property with no loan still counts as cash-out, so the 75% cap and the pricing for that category apply.
What Do the Seasoning Rules Require?
Two clocks run. The loan you are paying off must be at least 12 months old, measured from the old note date to the new note date. And at least one borrower must have been on title for 6 months before the new loan disburses. The Fannie Mae Selling Guide on cash-out transactions sets both tests. A property that was listed for sale must also be taken off the market by the disbursement date.
The title clock has named exceptions:
- Delayed financing. A cash buyer can refinance within the six-month window if the original purchase was arm’s-length, the purchase funds are documented and the borrower meets general eligibility. It is still priced as cash-out.
- Inheritance and legal awards. Divorce or separation awards have historically been exceptions. Confirm the current guide text with your loan officer before relying on one.
- Entity ownership. Freddie Mac lets time held by an LLC or LP count toward its six-month rule under conditions.
A recently refinanced vacation home runs into the 12-month note-age test. Nothing shortens that one, so plan around it.
Credit, Debt Ratios and Reserves
Your debt-to-income ratio includes the full payment on the vacation home, plus your primary housing payment and other debts. Second-home rental income cannot be used to qualify, so it does not offset the payment. Automated findings generally allow a total ratio up to 50%, though manually underwritten loans sit lower, at 36% or 45%, with reserve and score factors from the Eligibility Matrix.
Reserves are determined by the automated finding. On Fannie Mae files with a DTI above 45%, six months of reserves are required. Owning other financed properties can add reserves. Fannie Mae counts one- to four-unit properties where you are personally obligated, including a financed primary residence. Timeshares, vacant lots and commercial property do not count. A property financed in a LLC’s name, where you are not personally obligated, is excluded from the count.
Each step up in leverage, or down in credit score, tends to raise the pricing adjustment. Pricing is quoted on the Loan Estimate, not in an article.
Where the Rules Bend and Break
Rental use. Occasional rental is allowed only if you keep exclusive control, no management firm controls occupancy, and the income is not used to qualify. If the home is really operated as a rental, it moves to investment-property treatment, which is a different loan.
Two-unit properties. A second home must be one unit. Freddie Mac treats a two-unit property used as a second home as an investment property.
Condos. Project-level eligibility can lower the allowable leverage on some condos. Some lenders set stricter caps on limited-review projects.
Manufactured homes. Fannie Mae publishes separate rules, including multi-width versus single-width distinctions.
Buying out a co-owner. Freddie Mac has a special-purpose cash-out category for this.
Limited cash-out. If you only need to pay off the existing loan with minimal cash back, a second-home limited cash-out refinance reaches 90% LTV instead of 75%. That is a large difference. If your goal is a lower payment or a term change rather than cash, it may fit better. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Occupancy mix-ups. Two common ones: assuming any rental income turns a second home into an investment property (it does not automatically), and assuming a vacation home is automatically a second home (it is not).
Comparing Occupancy Types
| Factor | Primary residence | Second home | Investment property |
|---|---|---|---|
| Cash-out LTV cap | 80% (one unit) | 75% | 75% |
| Purchase LTV cap | 95% | 90% | 85% (one unit) |
| Units allowed | Up to four | One | Up to four |
| Rental income to qualify | N/A | Not allowed | Different rules |
Source for the cash-out comparison: the Fannie Mae Eligibility Matrix linked above. Purchase caps come from Lendmire’s program parameters, and a one-unit investment property is the case shown. Note that two- to four-unit investment properties are capped at 75% on a purchase, and the rental-income treatment differs.
Is a Cash-Out Refinance the Right Move?
Cash-out replaces your existing loan, so you get a new rate, a new term and a reset amortization. The CFPB has noted that cash-out refinances can bring higher rates, higher payments and larger balances than other refinances. It also warns that using the equity to pay credit cards turns unsecured debt into debt secured by your home.
A HELOC or home equity loan leaves your first mortgage in place. If your current first mortgage is one you would rather keep, that route deserves a look. If you need to restructure the whole loan, cash-out may fit better.
Proceeds have no use restrictions on conventional loans. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Using a primary-home refinance to fund a vacation purchase is the reverse of the strategy above, and the same advice about consulting a qualified tax professional applies.
Key Terms Defined
Second home: A one-unit property you occupy part of the year, can use year-round, and control exclusively.
LTV (loan-to-value): The loan balance divided by the appraised value, shown as a percentage.
CLTV: Combined loan-to-value, which adds subordinate liens such as a HELOC to the first mortgage.
Seasoning: The minimum time you have held title or the existing loan has been in place.
Delayed financing: An exception that lets a cash buyer take cash-out before six months on title.
Reserves: Liquid assets you must have left after closing, measured in months of housing payments.
Pre-Application Checklist
- Deed and title evidence
- Mortgage statements for every financed property
- Insurance and tax information on the vacation home
- Income and asset documentation
- Housing-payment verification if you have no reported primary-residence payment
- A clear picture of any rental activity, since the lender will ask
If the numbers feel tight, check the 75% math and the 12-month and 6-month clocks before applying. Those checks decide most files. 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 rent out my vacation home and still get a second-home cash-out loan?
Occasionally, yes. The home must stay under your exclusive control, no management company can control occupancy, and the rental income cannot be used to qualify. If the property is operated as a rental, it is treated as an investment property with different terms.
Why is the limit 75% instead of 80%?
Agencies price a second home as riskier than a primary residence, so the cash-out cap is lower. Both Fannie Mae and Freddie Mac set it at 75%. If you only need a limited cash-out refinance, the cap reaches 90%.
Does the cap equal the cash I will receive?
No. The cap sets the maximum new loan. Your existing first mortgage, any HELOC or second lien being paid off, and financed closing costs come out first, and the remainder is your cash.
Can I refinance soon after buying with cash?
Possibly. Delayed financing lets a cash buyer take cash-out inside the six-month title window if the purchase was arm’s-length and the funds are documented. It is still priced as cash-out, and you must meet general eligibility.
Do I need a minimum credit score?
The wholesale conventional programs start at a 620 decision score, but the automated finding governs most files, and some lenders set higher floors. A stronger score generally improves pricing. All terms are 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 brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.1-01, Occupancy Types
2. Fannie Mae Eligibility Matrix
4. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
5. CFPB
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: How to Get a Conventional Cash-Out on an Inherited Home · Should You Consolidate Debt Into a Conventional Cash-Out Refinance? · Conventional Cash-Out Refinance Requirements at a Glance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.