The Quick Read: A conventional cash-out refinance reaches 80% LTV on a one-unit principal residence and 75% on two- to four-unit homes, second homes and investment property. The first mortgage being paid off must be at least 12 months old, and a borrower must have been on title for 6 months. The lender sizes the loan off the home’s current appraised value, not the finished remodel, and does not control how the cash is spent. All figures are subject to lender guidelines and full file review.
What a Cash-Out Refinance Does for a Remodel
A cash-out refinance replaces your current first mortgage with a larger one. The new loan pays off the old balance and the closing costs. You keep what is left.
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.
That leftover cash is yours to spend. A standard cash-out has no use restriction, so the lender generally does not ask what the money is for. You can fund a kitchen, a roof, an addition, or a mix of projects and debt payoff.
Lendmire’s cash-out refinance programs page covers the wholesale lanes it places these loans in. Lendmire is a mortgage broker, not the lender, and it arranges these loans in the 16 states where it holds consumer lending licenses.
The flow at closing runs in this order:
1. The new loan pays off the existing first mortgage.
2. Closing costs come out of the new loan amount or from your own funds.
3. Any remaining balance is released to you as cash.
That order matters for sizing. LTV is measured against the home’s value, not against your equity. The payoff and costs come out first, and only the remainder reaches you. A borrower who assumes 80% LTV means 80% of equity in hand will overestimate the cash. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The Requirements at a Glance
Cash-out underwriting rests on a short set of tests. Across the wholesale programs Lendmire places files with, these are the ones that decide the outcome.
| Requirement | What the lender checks | Where a remodel plan matters |
|---|---|---|
| Leverage | 80% LTV on a one-unit primary residence; 75% on 2-4 units, second homes, investment property | Appraised as-is value sets the ceiling |
| Credit | Wholesale conventional programs start at a 620 decision score | Not affected by the project |
| Debt ratio | Total ratio ceiling of 50% on most automated findings | Not affected by the project |
| Seasoning | First mortgage 12 months old; 6 months on title | Recent buyers can fail here |
| Appraisal | As-is value on a plain cash-out | Planned work is not credited |
| Income and assets | Standard documentation | Contractor bids are not required |
Occupancy sets leverage, so a second home or rental carries the 75% cap. That is the only note this article gives on non-primary homes.
Eligibility is subject to lender guidelines and file review. Nothing here is a commitment to lend.
Does the Planned Remodel Change Underwriting?
On a plain cash-out, mostly no. The appraiser values the house as it stands today. A kitchen you intend to build does not add a dollar to that value.
This surprises borrowers. The lender looks at the home you have, the debts you carry, and the equity left after the new loan. It does not ask for plans, permits or a contractor contract, because the cash is not tied to the project.
Two practical points follow.
First, the appraised value is the ceiling. If you expect the remodel to lift value, that lift arrives after closing and can only help a later refinance.
Second, the condition of the home at appraisal still counts. Unfinished work, open walls or safety defects can complicate the appraisal. If the house is mid-demolition, finish or stabilize the work before the appraiser visits.
Renovation mortgages work differently, and that comes up below.
Seasoning and Existing Liens
The first mortgage being paid off must be at least 12 months old, measured from note date to note date. A borrower must also have been on title for 6 months, with exceptions for delayed financing, inheritance and legal awards.
Freddie Mac’s Guide Section 4301.5 sets out the same two tests, and they are separate. Six months of ownership does not satisfy the 12-month loan-age test. Both have to pass.
Three scenarios show where files break:
- Recent purchase. You bought eight months ago and want cash for a remodel. You miss the 12-month test unless an exception applies.
- Recent refinance. You refinanced last year, but the note date is under 12 months out. Wait for the clock.
- Paid-off home. You own it free and clear. Freddie Mac still treats the loan as cash-out, so a paid-off home gets no exemption.
An earlier home equity line used for a past project is a separate issue. If it is a second lien being paid off, it changes how the transaction is classified. The wholesale lender sorts that out during file review, so disclose every lien on the application.
Where the Remodel Does Matter: Renovation Mortgages
A renovation mortgage is a different loan structure. The remodel money is sized off the as-completed value and held in escrow. It is released as work is finished.
Three products work this way: Fannie Mae HomeStyle Renovation, Freddie Mac CHOICERenovation, and the FHA 203(k).
The rules differ, and each has a deadline and a ceiling:
| Product | Work deadline | Key limit |
|---|---|---|
| Freddie Mac CHOICERenovation | 450 days from note date | Refinance renovation costs capped at 75% of as-completed value |
| Fannie Mae HomeStyle | Varies by file and lender | No complete tear-down and rebuild |
| FHA 203(k) | Per HUD program rules | Home at least a year old; Limited version up to $75,000 |
Freddie Mac’s CHOICERenovation fact sheet bases its renovation cap on the as-completed value. HUD’s 203(k) program page explains that on a refinance, part of the proceeds pays off the existing mortgage and the rest goes into escrow until the rehabilitation is complete. HUD also notes the Limited 203(k) cap has been revised, so confirm the current figure.
Renovation loans add paperwork. Expect a contractor bid or contract, plans and a scope of work. The Standard 203(k) requires an FHA-approved consultant. Fannie Mae’s Selling Guide B5-3.2-02 describes a maximum mortgage worksheet and allows up to six months of PITIA in escrow when a principal residence cannot be lived in during the work.
Renovation loans are also typically structured as limited or no-cash-out refinances. That means the leverage rules can differ from the plain cash-out path. Treat it as a comparison, not a ranking. A plain cash-out gives freedom and no oversight. A renovation loan gives more borrowing power against the finished value, plus draws, inspections and a deadline.
Fannie Mae’s guide also lists HomeStyle Refresh transactions as ineligible for standard cash-out.
Streamlines Cannot Fund a Remodel
The government streamlines are built for lower payments, not cash.
The FHA Streamline requires an existing FHA loan, a net tangible benefit, and caps cash back at $500. HUD’s streamline page also says closing costs cannot be added to the new loan amount. The VA IRRRL requires an existing VA loan and allows no cash back in the ordinary case.
If a remodel is the goal and you hold an FHA or VA loan, the streamline is the wrong tool. A cash-out or renovation structure is the path.
Choosing the Structure: A Decision Table
| Your situation | Likely fit |
|---|---|
| Strong equity, flexible project, want no oversight | Standard cash-out |
| Large project, value gain after work, can accept draws | Renovation mortgage |
| Existing FHA or VA loan, only want a lower payment | Streamline or IRRRL |
| Complete tear-down planned | Not HomeStyle; talk to a broker about options |
The 75-80% cap on a plain cash-out can make a large project hard to fund from current value alone. That is where a renovation mortgage can unlock value, because it sizes off the post-remodel appraisal.
Sizing the Loan and the Budget Risk
Pad the budget. Remodels run over, and closing costs come out of the new loan or your pocket. Those costs typically include origination, appraisal and title charges, and they add up. There is no standard percentage, so compare Loan Estimates from more than one lender rather than assuming a number.
Borrowing the maximum is not always smart. The CFPB’s home equity guide says lenders typically want you to keep 10% to 20% of the home’s value as equity. It also warns that a cash-out replaces your whole first mortgage, so you lose the old loan’s terms, and the payment can rise as the payoff date moves out.
Run a payment-impact check, not just an equity check. A project you can afford at today’s balance may strain the budget at the larger one.
What to Gather Before You Apply
- Two recent years of income documents and current pay records, per the lender’s file requirements.
- Recent bank and asset statements.
- The note date and payoff statement on your current first mortgage.
- Details on any second lien or home equity line.
- For a renovation loan: contractor bid, plans, scope of work and permits.
Apply before you sign a contractor contract or pay a large deposit. Cash arrives at closing, but contractors often want money earlier. Sequence the loan and the contract so you are not floating the project on credit cards.
Who Should Skip It
Skip a plain cash-out if your first mortgage is under 12 months old, your total debt ratio is stretched, or your current loan terms are valuable and you only need a small amount. A smaller project may not justify replacing the whole loan and paying new closing costs.
Also skip it if the plan is a complete tear-down. HomeStyle excludes it, and the standard path is limited by what the home is worth now.
Key Terms Defined
Seasoning: the minimum time a loan or ownership has existed before a new refinance is allowed.
As-completed value: the appraised value of the home assuming the planned work is finished.
Limited cash-out refinance: a refinance that pays off the first mortgage and costs, with only small incidental cash back.
LTV: the new loan amount divided by the home’s appraised value.
Escrow draw: a release of renovation funds as work is completed and inspected.
Frequently Asked Questions
Does the lender need my contractor bid for a cash-out refinance?
Not on a plain cash-out, because the proceeds are generally unrestricted. A renovation mortgage does require a bid or contract, plans and a scope of work. Terms vary by lender and program.
Will the appraisal count the remodel I plan to do?
No on a standard cash-out. The appraiser values the home as it is. A renovation loan uses the as-completed value instead.
Can I do a cash-out right after buying the house?
Usually not. The first mortgage needs to be 12 months old and you need 6 months on title, with exceptions for delayed financing, inheritance and legal awards. A paid-off home is still treated as cash-out.
Can an FHA Streamline or VA IRRRL pay for a remodel?
No. The FHA Streamline caps cash at $500, and the VA IRRRL generally allows no cash back. Both exist to lower the cost of an existing loan.
Is mortgage insurance required on a cash-out?
Conventional mortgage insurance is required above 80% LTV, with one wholesale lane as the exception. That lane reaches 89.99% LTV with no mortgage insurance at a 680 score, a 50% ratio and a thirty-year fixed on a conforming primary residence. It carries its own six months of seasoning. Guidelines and availability depend on the lender and your state.
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, at 828-256-2183.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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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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
2. Freddie Mac CHOICERenovation fact sheet
4. Fannie Mae Selling Guide B5-3.2-02
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 Second Cash-Out Refinance in a Row · Cash-Out Refinance Requirements for First-Time Borrowers · Cash-Out Refinance Requirements and LTV Limits
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.