The Quick Read: Child support can help you qualify for either loan, but only if you choose to rely on it, can document it, and it is likely to continue. A cash-out refinance replaces your current mortgage with a bigger one. A home equity loan leaves that mortgage alone and adds a second loan on top. The first tends to suit borrowers whose current mortgage is no longer a bargain. The second tends to suit borrowers who want to keep the first mortgage and borrow a smaller amount.
Both loans use your home as collateral, and both ask the same question about your support income: will it last long enough to count? That makes the remaining life of the support order a central issue whichever product you choose. Lendmire’s cash-out refinance programs page outlines the first option in more detail.
Key Takeaways
- Child support is optional income. You decide whether to rely on it.
- Lenders generally want a written order or agreement, a history of receiving payments, and evidence that payments will continue for years.
- A cash-out refinance is one new first mortgage. A home equity loan is a second payment on top of the one you already have.
- A child nearing adulthood can make support income unusable for either loan.
- Support you pay out counts as a debt, not income.
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
The table below covers how the two structures differ. Cash-out figures reflect conventional programs arranged through wholesale lenders and are subject to lender guidelines and full file review. Home equity loan terms are set by each second-lien lender.
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| What happens to your mortgage | Replaced by a new, larger loan | Stays; a second loan is added |
| Leverage | 80% LTV on a one-unit primary home | Set by the second-lien lender |
| Lower-leverage cases | 75% on 2-4 units, second homes, investment | Varies by lender |
| Credit floor | Wholesale conventional starts at 620 | Varies by lender |
| Mortgage insurance | Usually not needed at 80% LTV or below | Not typical |
| Occupancy | Primary, second home or investment | Varies by lender |
| Seasoning | Existing first loan 12 months old | Varies by lender |
One more row matters, though it isn’t a number. A cash-out refinance underwrites the whole new first mortgage as a fresh loan. A home equity loan underwrites only the new second lien, but the lender still sees your first mortgage payment in your ratios.
How Child Support Gets Counted
You are not required to list child support. If you rely on it, the lender evaluates it from your actual circumstances, not from assumptions about people who receive support. Federal law on this point is Regulation B, covered in the CFPB’s rule text. The lender then applies its own documentation and continuance rules.
For conventional loans, the Fannie Mae Selling Guide sets the benchmark. Lenders typically need these items:
1. A divorce decree, separation agreement, court order or other legal basis for the payments.
2. A history of receiving payments, with a six-month minimum.
3. Evidence the income will continue for at least three years from the application date.
4. A check of limits on the support, such as the age of the children covered.
Qualifying child support is nontaxable, and Fannie Mae allows it to be grossed up in the ratio. If you are separated with no agreement, proposed or voluntary payments are not counted.
Freddie Mac’s Guide also asks for a signed order or binding agreement, the children’s ages and six months of receipt. Its wording on how long the income must continue may not match Fannie Mae’s, so ask your loan officer which standard applies to your file.
The six-month history is only one test. The child’s age matters as well. An order that ends at age 18 with a child who is 16 can leave the income unusable, even for a borrower who has been paid for years.
FHA and VA loans have their own treatment of support income. Lendmire’s article on the best VA cash-out refinance program when child support counts as income covers the VA lane. Ask your loan officer how FHA guidelines treat support income on your file.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance fits when your existing mortgage is part of the problem, not something to protect. It also fits when you need one clean payment and a larger amount of cash. Here are the profiles where it tends to work well.
You want one payment and one lender. The new first mortgage pays off the old one and delivers the cash. Your budget has one housing payment, not two.
Support income is a solid part of your ratio. The lender underwrites the full new loan. If your support order has years left, is well documented and is nontaxable, the gross-up can help your debt-to-income ratio. Wholesale conventional programs generally cap total ratios at 50% on an automated approval, subject to lender guidelines.
You have meaningful equity and a long-held loan. Conventional cash-out typically reaches 80% LTV on a one-unit primary home. Two- to four-unit homes, second homes and investment properties sit at 75%, so occupancy sets the leverage. The loan being paid off must be at least 12 months old, measured note date to note date, and you generally need to have been on title for six months. Delayed financing, inheritance and legal-award exceptions exist. Fannie Mae’s cash-out eligibility notice explains the 12-month rule for the loan being refinanced.
You want to avoid mortgage insurance. Conventional mortgage insurance applies above 80% LTV on the agency path, with one exception. A wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio on a 30-year fixed, primary residence and conforming balance. It carries its own six months of seasoning. Not every file fits that lane. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Your credit has room to improve the structure. Wholesale conventional programs start at a 620 decision score, with the automated finding governing most files. Stronger credit tends to give you more flexibility.
The flip side is real. Replacing a mortgage you like means giving it up. If your first mortgage has terms you would not be able to match today, a cash-out refinance reprices the entire balance, not only the new cash. That is a mechanical fact, not a pitch for or against.
When a Home Equity Loan Is the Better Fit
A home equity loan fits when the first mortgage is worth keeping and you need a defined amount of money. The CFPB describes it as a lump sum secured by your equity, usually with a fixed rate and sometimes with upfront costs.
You are protecting a good first mortgage. Nothing about it changes. A cash-out refinance would rebuild the whole loan.
You need a smaller amount. Borrowing a modest sum against equity can make sense when it is a fraction of what a full refinance would involve.
Your support income is thin or ending soon. Be careful with this one. A home equity loan is not a shelter from the continuance test. The lender still looks at your total payments, including the existing mortgage, so support that fails the test can’t be used here either. What a second lien can offer is a smaller loan size, not looser income rules.
The tradeoffs deserve equal weight. A home equity loan is a second mortgage. As the CFPB explains, the second lender is paid second if the home is foreclosed, second mortgages often carry higher interest rates than first mortgages, and the loan adds to your overall debt. Using equity to pay off other debts moves the debt around. It doesn’t eliminate it.
Lender availability matters too. Wholesale mortgage programs are built around first-lien loans, so a home equity loan often comes from a different lender than your first mortgage. A second-lien lender may also need to agree to stay in place if you later refinance the first mortgage.
A Scenario With No Dollar Amounts
Picture a borrower who has owned a home for several years and receives child support for a young child. The order runs well past three years, and the borrower has documented a long payment history. The existing mortgage is in good shape. The goal is a mid-sized home improvement project.
Here the home equity loan may be the simpler path. The first mortgage stays untouched, and support income, if used, would pass the continuance test. A cash-out refinance would also work for qualifying but could replace a mortgage the borrower prefers.
Now change one fact. The order ends when the child turns 18, and the child is 16. Neither lender can count that support, so the borrower is reviewed on other income alone. That may mean a smaller loan, or a different plan.
Change another. The borrower pays child support instead of receiving it. That payment is a recurring debt in the ratio under both products, and it is not income.
Common Mistakes
- Counting informal payments. Deposits without an order or agreement generally don’t satisfy the documentation rules.
- Ignoring the child’s age. Check the end date of the order before choosing a product.
- Treating a home equity loan as easier. It still requires ability to repay and adds debt.
- Mixing up streamlines. The FHA Streamline and VA IRRRL are rate-and-term products for existing government loans. They don’t provide cash out, so they aren’t substitutes for either option here.
- Skipping the tax conversation. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off your current one and gives you the difference in cash.
Home equity loan: A lump-sum second mortgage that sits behind your existing first mortgage.
Continuance: The lender’s test that your support income will keep arriving, typically for at least three years.
Seasoning: The minimum time you must have held the loan or title before a new loan can be written.
Gross-up: An increase to nontaxable income in the ratio to reflect its tax-free value.
Second lien: A loan repaid after the first mortgage if the home is sold in foreclosure.
The Balanced Verdict
Neither loan is better for everyone. The cash-out refinance is the stronger structure when you want one payment, want to rebuild the loan, or have enough documented income to carry a larger first mortgage. The home equity loan is the stronger structure when the first mortgage is worth keeping and the cash need is smaller.
Support income cuts across both. A documented, court-ordered, long-running order helps either product. A short remaining term or informal payments help neither. Sort out the support question first, then compare the structures.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Do I have to list child support to get approved?
No. Child support is optional income, and under Regulation B a lender must tell you that you don’t need to rely on it. If you qualify without it, you can leave it out. If you do include it, expect to document it.
Does a home equity loan have easier income rules than a cash-out refinance?
Not in the way people hope. A home equity loan is underwritten for ability to repay, and the lender counts your existing mortgage payment too. Support income must meet the same kind of documentation and continuance tests. What a second lien offers is a smaller loan, not looser rules.
What if my support order ends within three years?
Conventional guidelines generally won’t count income that is not expected to continue for at least three years. The lender checks things like the age of the children covered. You may still qualify on your other income, possibly for a smaller amount.
Can I refinance soon after a divorce?
Possibly, if the support has a written legal basis and a payment history, and any existing loan meets seasoning rules. A cash-out requires the loan being paid off to be at least 12 months old. A buyout of a co-owner under a written agreement is treated as a limited cash-out transaction at both agencies. Your facts decide the details.
How does paying child support affect my application?
Support you pay is a recurring debt in your ratio, not income. It reduces how much you can borrow under either product. A lender may ask for the order to confirm the amount.
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 broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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 Regulation B, 12 CFR 1002.5
2. Fannie Mae Selling Guide B3-3.4-02: Alimony, Child Support, or Separate Maintenance
3. Freddie Mac Guide: Alimony and Child Support Requirements
4. Fannie Mae Capital Markets: Cash-Out Refinance Eligibility Update
5. CFPB: What Is a Home Equity Loan
6. CFPB: Second mortgage / junior lien
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 vs Home Equity Loan With Income Verification and Asset Requirements · How Much Cash Comes Out of a Cash-Out Refinance to Access Cash From Home Equity? · How Much Cash Comes Out of a Cash-Out Refinance on a Rural Home With USDA Loan?
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.