Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The Quick Read: A cash-out refinance replaces your first mortgage with a bigger one. A home equity loan leaves the first mortgage alone and adds a second loan behind it. That one difference decides how much cash each option can reach. A cash-out refinance is for homeowners who want to reset the whole loan and can live within a firm leverage cap. A home equity loan is for homeowners who like the first mortgage they have and want a fixed lump sum on top. Property type matters most on the refinance side, because occupancy and unit count set the cap. Everything here is subject to lender guidelines and full file review.
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 happens to your first mortgage | Paid off and replaced | Stays in place |
| Number of loans afterward | One | Two |
| Leverage cap | 80% LTV on a one-unit primary home; 75% on other types | Set by each lender; no agency maximum |
| What the cap measures | The entire new loan | Usually first mortgage plus the new loan |
| Credit floor | Wholesale conventional programs start at a 620 decision score | Lender-specific |
| Mortgage insurance | Rarely comes up at or below 80%; the wholesale no-MI lane is written without it | Generally not part of the structure |
| Occupancy | Primary home, second home, or investment property | Lender-specific; often limited for non-primary homes |
| Documentation | Full credit, income, and appraisal review | Lender-specific |
LTV means loan-to-value: the loan balance as a percentage of what the home appraises for. Read the table as a map, not a promise. Individual lenders can set tighter limits than the programs allow.
How Each One Actually Works
A cash-out refinance is one new first mortgage. It pays off your current loan, covers the closing costs you finance, and sends you the difference. The appraisal sets the value. The leverage cap applies to the whole new loan, so your payoff and financed costs come out of the ceiling before any cash reaches you.
That is where homeowners misjudge it. An 80% cap does not mean 80% of your value in your pocket. It means the total new loan can reach 80% of value. If you owe 50% of your home’s value today, the most you can pull out is the remaining 30% of that value, before closing costs and any other financed costs.
A home equity loan works differently. It is a second mortgage, which the Consumer Financial Protection Bureau describes as a loan secured by the house while another loan stays in place. You get a lump sum and repay it on a fixed schedule. The FTC notes that a home equity loan typically carries a fixed APR and pays out all at once, and that many lenders want you to keep a cushion of equity rather than borrow all of it.
No agency publishes a single maximum for home equity loans. Each lender sets its own combined limit, so the number you see will depend on who you ask.
The Property-Type Limits (Where the Two Products Split)
The cash-out side has hard, published caps by occupancy and unit count. Across the wholesale programs Lendmire places files with, conventional cash-out runs like this:
| Property type | Cash-Out Refinance Cap | Home Equity Loan |
|---|---|---|
| One-unit primary residence | 80% LTV | Lender-set |
| Two- to four-unit primary residence | 75% LTV | Lender-set |
| Second home | 75% LTV | Lender-set |
| Investment property | 75% LTV | Lender-set |
Occupancy sets the leverage. A cash-out is written on a primary residence, a second home, or an investment property, and the cap drops to 75% once you leave the one-unit primary home. Fannie Mae’s Selling Guide governs cash-out transactions, and its Eligibility Matrix lists LTV, CLTV, and HCLTV side by side. Confirm any specific cap against the current matrix and your lender’s overlays.
Here are the key terms in plain language.
Key Terms Defined
LTV (loan-to-value): Your new first-mortgage balance as a percentage of the home’s appraised value.
CLTV (combined loan-to-value): All loans secured by the home, added together, as a percentage of value.
Second lien: A loan recorded behind your first mortgage, so it is repaid second if the home is sold to pay debts.
Seasoning: The waiting period a lender requires between an earlier event, such as buying the home or closing your current loan, and a new loan.
Subordination: A second-lien lender’s written agreement to stay behind a new first mortgage when you refinance the first loan.
A Same-Home Walkthrough
Start with an owner who owes 50% of the home’s value. A cash-out refinance at the 80% cap leaves about 30% of value in new money, less financed costs. A home equity loan could reach a similar combined number if the lender allows it, though its combined limit may be lower or higher than 80%.
Now change the profile. Say the owner owes 70% of value. The one-unit refinance cap leaves roughly 10% of value in cash, before costs. A two-unit primary residence at 75% leaves roughly 5%. A second home at 75% leaves the same.
In that tighter case, a second loan may reach further if your lender’s combined limit sits above the refinance cap. It may also come in lower. Neither product wins by default. Check which limit binds first for your profile.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance fits when you want one loan instead of two. It fits when the existing first mortgage is not worth protecting, or when you want to reset the term of the entire balance. It also fits when the cash need is large and your equity is deep.
Other situations favor it too:
- You already carry a second lien. Paying it off inside the new first loan folds everything into one payment. Leaving it in place means the second lender must agree to stay behind the new loan.
- You want the property-type lanes. A second home or an investment property can be refinanced for cash on conventional programs, with the lower 75% cap. Many second-lien products are narrower on occupancy.
- You have strong credit and low debt. One wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% total-debt ratio. It covers a thirty-year fixed loan on a primary residence at a conforming balance, and it has its own six months of seasoning. Only certain files fit. It is not written in Texas.
Know the costs of the choice. A cash-out refinance reprices and re-terms your entire first mortgage, not just the new money. The CFPB points out that a cash-out refinance can cost more or less than a second-lien product, depending on terms. It can also stretch your payoff timeline. You pay closing costs on the full new loan.
Lendmire’s cash-out refinance programs page shows the full set of options.
When a Home Equity Loan Is the Better Fit
A home equity loan fits when your first mortgage is worth keeping. That can mean a payoff schedule you are happy with or a loan you are close to finishing. It leaves that loan untouched and adds a fixed-term second loan beside it.
It also fits a smaller, defined cash need. If you are borrowing for one project with a known cost, a lump sum on a fixed schedule is predictable. And it fits when you want closing costs on the new money only, not on your whole balance.
The tradeoffs are real:
- Two payments. You carry the first mortgage and the second loan each month.
- A second-lien position. The lender is repaid after your first mortgage if the home is sold to pay debts. The CFPB notes that this is why second mortgages often carry higher interest rates than first mortgages.
- Lender-set limits. Because no agency sets the ceiling, your combined limit depends on the lender, your credit, your income, and the home’s value.
Debt consolidation deserves honesty here. Using home equity to pay off cards does not erase the debt. It swaps unsecured balances for a loan secured by your home. If card balances creep back up afterward, you carry both the new loan and the new card debt. The product is a tool. The spending behavior around it decides the outcome.
Which Cap Binds First?
Work through these in order.
1. Add up everything secured by the home. First mortgage, any second lien, any credit line.
2. Divide by the appraised value. That is your current combined position.
3. Check the cash-out cap for your property type. One-unit primary is 80%; the other types are 75%.
4. Compare it with your lender’s limit for a second loan. That figure is lender-specific.
5. Pick the lower ceiling. The lower one binds.
In Texas, a cash-out on a homestead is capped by the state constitution at 80% of the home’s value. That is a state rule, not a program choice. Lendmire’s piece Texas Cash-Out Refinance vs Home Equity Loan: What Decides covers how that plays out.
Seasoning and Ownership: The Timing Rules
You cannot always refinance right after you buy. For conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted from note date to note date. Freddie Mac’s Guide also asks for six months on title, with limited exceptions. Delayed financing, inheritance, and legal awards are among them.
A second-lien product has no agency seasoning rule, but lenders set their own waiting periods. Ask early.
What About Your Credit and Debt Load?
For the wholesale conventional programs Lendmire places, the credit floor starts at a 620 decision score. The automated finding governs most files, with a total-debt ratio ceiling of 50%. Manually underwritten loans use tighter ratios of 36% or 45%, with reserve and score factors from the Eligibility Matrix. A past bankruptcy, foreclosure, or short sale brings agency waiting periods. Documented extenuating circumstances can shorten them.
Home equity lenders run their own credit and debt tests. Expect them to vary, and compare more than one.
The Balanced Verdict
Choose the cash-out refinance when you want to restructure everything, you have deep equity, or you hold a second home or rental that the refinance lanes cover. Choose the home equity loan when you want to protect a first mortgage you like and need a defined sum on top.
For many homeowners the choice is close. The honest test is simple. Add up your total debt against the home. Check which ceiling binds. Then compare the total cost of the full loan structure, not just the new money. A good broker can lay out both side by side before you commit to either.
Frequently Asked Questions
Can I take out 80% of my home’s value in cash?
No. The 80% cap on a one-unit primary home covers the entire new loan, including your payoff and financed costs. Your cash is whatever room is left under the cap. Owe half your value and the room is roughly 30% of value, before costs.
Which product usually gives me more cash?
It depends on your balance and your lender. A cash-out refinance has published caps by property type. A home equity loan has a lender-set combined limit. Whichever ceiling is higher for your profile yields more, and both can be higher or lower depending on the lender.
Does an existing second mortgage reduce my cash-out?
Yes, it counts toward the combined position. If the refinance pays it off, it folds into the new first loan under the cap. If it stays, the second lender must agree to stay behind the new first mortgage.
Can a second home or a rental property get cash out?
Yes, on conventional programs, at the 75% cap rather than the 80% one-unit primary figure. Occupancy sets the leverage. Home equity lenders are often narrower on non-primary homes, so ask about it.
Do I have to wait before taking cash out?
Often, yes. A conventional cash-out generally needs the loan being paid off to be at least 12 months old and six months on title, with exceptions. Lender waiting periods for second loans vary.
Next Step
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. A short conversation about your balance, your property type, and your goal usually shows which ceiling binds first.
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
1. Consumer Financial Protection Bureau
2. FTC: Home Equity Loans and Home Equity Lines of Credit
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Fannie Mae Eligibility Matrix
5. Freddie Mac Guide Section 4301.5
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 to Use Cash-Out Refinance Proceeds as Reserves on the Same Loan · How a Cash-Out Refinance Works When the Owner Rents Their Home · How to Replace Your Old Loan With a Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.