The Quick Read: The choice turns on one date: the note date of the refinance you closed about a year ago. A conventional cash-out refinance replaces your first mortgage, so that loan’s age matters. A home equity loan adds a second mortgage and leaves the first one alone, so the first loan’s age is not the same kind of test. A cash-out suits you if the first loan has aged enough and you want one payment. A home equity loan suits you if you are short on the clock or want to keep the first loan as is.
Neither option is better in the abstract. Your timing, your current first mortgage, and how much cash you need decide it. Some people discover they should do neither.
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: 7.18% as of November 5, 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.
Side-by-Side
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| What it does | Replaces your first mortgage | Adds a second mortgage |
| Number of loans after | One | Two |
| Typical conventional leverage | 80% LTV on a one-unit primary home | Set by each lender’s combined limit |
| Loan-age test | First mortgage must be 12 months old | No federal rule; lender sets its own |
| Credit floor | Wholesale conventional starts at a 620 score | Varies by lender |
| Mortgage insurance | Generally none at or below 80% LTV | Not typical on a second lien |
| Occupancy | Primary, second home, or investment | Varies by lender |
| Documentation | Full re-underwrite of the new first loan | Underwrites the new second loan |
Every figure above is a guideline range. It is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Check Your Clock First
Start with the note date. The note is the signed promise to repay, and its date is the day you signed. For a conventional cash-out refinance, Freddie Mac requires that a first lien being paid off be seasoned at least 12 months, counted from the note date of the old loan to the note date of the new one. Fannie Mae uses the same note-to-note measure. Seasoning simply means how long a loan has existed.
There is a second clock. At least one borrower generally has to have been on title for six months. Most people who refinanced a year ago clear that one easily. The 12-month first-mortgage test is the one that catches them.
A few exceptions exist. The 12-month test does not apply to subordinate liens being paid off. It also does not apply to co-owner buyouts. So if your loan from a year ago was a home equity loan or second lien rather than a first mortgage, the picture changes. Delayed financing and inheritance have their own exceptions as well.
One more distinction concerns the limited cash-out refinance, which works differently from a true cash-out. It pays off your existing first mortgage and closing costs, with only small incidental cash back. It is not a way to pull real equity out.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance fits when your first mortgage has cleared the 12-month test and you want to end up with one loan. It also fits when the first loan’s terms are no longer a prize you want to protect.
Leverage is the main gate. Conventional cash-out generally tops out at 80% LTV on a one-unit primary residence. On two- to four-unit primary homes, second homes, and investment properties, it is 75%. LTV means loan-to-value: your loan balance as a percentage of the home’s appraised value. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution.
There is one narrow exception worth knowing. A wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a thirty-year fixed rate, a primary residence, a conforming balance, a 50% total ratio on an automated approval, and its own six months of seasoning. Texas homestead loans are not written in that lane. Treat it as a niche door, not the usual path. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Mortgage insurance is the other piece. It is generally required above 80% LTV on the agency path, with that no-insurance wholesale lane as the exception. At 80% or below, you usually skip it.
Consider a homeowner who refinanced thirteen months ago and now needs funds for a major repair. Her first loan has aged past 12 months. She has well over 20% equity. One new first mortgage replaces the old one, and she makes one payment. The trade-off is that the whole balance is repriced, including the portion she already had. If the loan from a year ago carries terms she likes, that is a real cost of choosing this route.
Credit matters too. Wholesale conventional programs start at a 620 decision score, and most files are governed by the automated underwriting finding. The total ratio ceiling is 50% on automated approvals, the same figure the 89.99% lane uses. Only manually underwritten loans use the lower 36% or 45% limits, depending on reserves and score factors.
When a Home Equity Loan Is the Better Fit
A home equity loan fits when you want to keep your current first mortgage untouched, or when the 12-month test blocks a conventional cash-out. The CFPB describes a home equity loan as a loan secured by your equity, received as a lump sum, usually with a fixed rate. Because you already have a mortgage, it becomes a second mortgage paid in addition to the first.
That structure explains why it comes up for recent refinancers. No federal seasoning rule for home equity loans applies. That does not mean no waiting period exists anywhere. An individual lender can set its own, so ask before assuming.
Equity is the limit here. The FTC notes that lenders often prefer you borrow no more than 80% of your equity. Add your first mortgage and the new second together, and the combined total has to fit the lender’s ceiling. Lenders vary on that number.
Picture a borrower who refinanced nine months ago and locked in a first mortgage he is happy with. He needs a smaller lump sum. A second loan lets him leave that first mortgage alone. The price is a second payment each month and a second set of closing costs. The CFPB notes these loans may carry upfront fees, so compare more than the monthly payment.
One related quirk: if you add new subordinate financing while refinancing your first mortgage, Fannie Mae can treat the whole transaction as limited cash-out, provided the first mortgage meets those criteria. That is a narrow structure, and it is worth asking your loan officer whether it applies to you.
A home equity line of credit (HELOC) is a related product. It is a revolving line rather than a lump sum, and the CFPB notes a cash-out refinance may cost more or less than a HELOC depending on terms. The same second-lien logic applies.
What the Refinance From a Year Ago Does and Doesn’t Change
It changes the clock. A new note date starts the 12-month count fresh for conventional cash-out. If you refinance again too early, you may need to wait again.
It does not change your equity by itself. Equity is the home’s value minus what you owe. Your appraisal drives the maximum on either path, and closing costs rolled into the last loan may have trimmed your cushion.
It also does not change your lien position. Your first mortgage is still first. A home equity loan sits behind it, which is why lenders treat second liens as riskier.
Government loans work differently. If your loan from a year ago is FHA or VA, the streamline products are not cash-out tools. The FHA Streamline allows no meaningful cash out. The VA IRRRL is for an existing VA loan and carries its own seasoning of the later of 210 days and six payments. Both require a net tangible benefit. Standard FHA cash-out has its own occupancy and payment-history tests, so verify the current Handbook text before relying on anything you read secondhand.
Do Either? The Case for Waiting
Sometimes the best move is neither. Consider these cases:
- Your first mortgage is one you’d hate to lose. A cash-out reprices everything. A second loan may be the cleaner route, or the answer may be to wait.
- You are only a few weeks short of 12 months. Waiting for the note date to age may open the conventional cash-out door.
- You need a small amount. Two sets of closing costs in a short window can eat the benefit. Compare total costs, not just the monthly payment.
- The need is not urgent. Both options put your home at risk if payments are missed. The CFPB notes a lender could foreclose on a home equity loan, and it suggests a nonprofit credit counselor before consolidating debt.
Closing costs deserve a break-even look. Recent refinancers have already paid once. Ask how long it takes for any savings or benefit to outrun a second round of costs.
Both loans on a primary residence generally carry a three-business-day right to cancel after closing. The CFPB explains the right of rescission for refinances and home equity loans. The clock starts only after you sign, get the Truth in Lending disclosure, and receive two copies of the notice. Saturdays count as business days. A second home generally has no federal right of rescission.
Key Terms Defined
Note date: The date you signed the promissory note for a loan. Seasoning tests count from this date.
Seasoning: How long a loan or ownership has existed. A cash-out refinance requires the first mortgage being paid off to be at least 12 months old.
Lien position: Where a loan ranks for repayment. A first mortgage is paid before a second.
Combined loan-to-value (CLTV): All loans against the home, added together, as a percentage of its value.
Limited cash-out refinance: A refinance that pays off the first mortgage and costs, with only small incidental cash back.
The Verdict
If your first mortgage has passed 12 months from its note date and you want one payment, a cash-out refinance is usually the cleaner tool. If you are short on the clock, or you want to keep the first loan exactly as it is, a home equity loan is the more flexible one. A lender’s own waiting period on the second loan is the thing to ask about.
This is close to a toss-up for many borrowers. The decision often comes down to how much you value your current first mortgage versus the simplicity of a single loan.
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. See Lendmire’s cash-out refinance programs page for how those options work, then reach out at 828-256-2183.
Frequently Asked Questions
Can I do a cash-out refinance exactly one year after my last refinance?
Only if the note date of that loan is at least 12 months before the new note date. Calendar impressions don’t count. Closing in the same month a year ago can still fall short by a few days. Ask your loan officer to check the exact note date against the file.
Does a home equity loan have a waiting period after a refinance?
No federal waiting period applies that I know of. Individual lenders can set their own, though, so the answer varies by lender. Ask up front, before you pay for an appraisal.
Is the six-month rule the same as the 12-month rule?
No. The six-month test concerns how long a borrower has been on title. The 12-month test concerns the age of the first mortgage being paid off. Both can apply to the same file, and they run as separate clocks.
Can an FHA Streamline or VA IRRRL give me cash?
Not in any meaningful amount. These are for existing FHA and VA loans, and they aim at a net tangible benefit rather than cash. If cash is the goal, other products are the route, subject to program rules and file review.
Do I lose my current first mortgage terms with a cash-out refinance?
Yes. A cash-out replaces the whole first mortgage with a new one, so the entire balance takes the new loan’s terms. A home equity loan generally leaves the first mortgage untouched. Weigh that against the convenience of one payment.
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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References
2. Fannie Mae
3. CFPB: What Is a Home Equity Loan
4. FTC: Home equity loans and HELOCs
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 Lenders Underwrite a Cash-Out Refinance on a Home You Own · How to Qualify and Apply for a Cash-Out Refinance on a Rural Home With a USDA Loan · How to Qualify for a Cash-Out Refinance on a CPA PL Loan
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.