The Quick Read: It depends on which lender is pulling the score and what kind of loan it is. A cash-out refinance is a new first mortgage, and when it is sold to Fannie Mae or Freddie Mac, agency rules decide which score model and which borrower’s score count. A home equity loan is a separate second mortgage, and the lender may set its own score policy. So the same borrower can look stronger on one product and weaker on the other, and the right choice often turns on that gap.
Side-by-Side
The table below compares the two products on the points that matter most for a homeowner. Program figures reflect the wholesale conventional programs Lendmire works with and are 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.
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| What it is | New first mortgage replaces the old one | Separate second mortgage |
| Payments | One payment | Second payment alongside the first |
| Leverage | 80% LTV on a one-unit primary home | Set by the lender’s own policy |
| Credit floor | Starts at a 620 decision score on wholesale conventional | Varies by lender |
| Score rules | Agency rules when sold to Fannie Mae or Freddie Mac | Lender’s own policy if it keeps the loan |
| Mortgage insurance | Above 80% LTV, with one wholesale exception | Typically not applicable |
| Seasoning | First mortgage at least 12 months old | Varies by lender |
| Existing loan | Entire first-mortgage balance is reopened | First mortgage left alone |
Why Two Lenders Can Show You Two Different Scores
Two lenders can pull different scores on the same person without either one making a mistake. The Federal Housing Finance Agency explains that loans sold to Fannie Mae and Freddie Mac required Classic FICO for decades, and lenders may now use VantageScore 4.0 as well. During that transition, one lender may be set up for the newer model while another stays on the old one.
Then there is the choice of number. On agency loans, the lender pulls scores from all three credit bureaus. For each borrower, the score used is the middle of three, or the lesser of two if only two exist. With more than one borrower, the lowest of those becomes the loan’s representative score. Freddie Mac’s Guide section 5202.1 uses a similar “middle/lower then lowest” approach.
Here is where the home equity side differs. No single standard dictates which score a home equity lender must use. Agency rules govern loans sold to the agencies. A second mortgage the lender keeps on its own books follows that lender’s policy. That is why one of the best questions you can ask is simple: “Which score model and which bureaus do you use for this product?”
The score in your banking app is a third number. Consumer apps often show a different model than mortgage underwriting uses. Treat the app as a rough guide, not the number a lender will see.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance tends to fit when you want one loan, one payment and the most predictable rule set. Because it is a first mortgage, the scoring rules are written down and public. Across the wholesale programs we place files with, conventional cash-out starts at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%.
It also fits when your existing first mortgage is not one you are attached to. A cash-out refinance reopens the whole balance, so it makes the most sense if you are already planning to replace that loan. If you are weighing it seriously, Lendmire’s cash-out refinance programs page lays out the equity each option reaches.
Leverage is the other piece. On a one-unit principal residence, conventional cash-out reaches 80% LTV. Two- to four-unit principal residences, second homes and investment property reach 75%, so the way you occupy the property decides how much you can borrow. There is also a wholesale lane that reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed, on a primary residence with a conforming balance. It carries its own six months of seasoning. It is the one exception to the rule that mortgage insurance is required above 80% LTV. That lane is not written in Texas, where a cash-out on a homestead is capped at 80% of the home’s value by the state constitution. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
A cash-out refinance can also suit a borrower whose score is borderline on a model one lender uses. The 620 figure is the starting decision score on our wholesale programs, while Fannie Mae’s automated underwriting does not apply a fixed minimum score of its own. It weighs the whole file, so a lower score paired with strong equity, reserves and ratios may still be reviewed. Lenders can still add their own requirements, which is why the program starting point is the number to plan around.
Seasoning matters here. The first mortgage being paid off must be at least 12 months old, measured note date to note date, and a borrower must have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist.
Our related piece Cash-Out Refinance vs. Home Equity Loan When You Need Full Value goes deeper on the equity side.
When a Home Equity Loan Is the Better Fit
A home equity loan fits when the first mortgage is worth keeping. The Federal Trade Commission describes a home equity loan as a loan secured by your home, sometimes called a second mortgage. Your first mortgage stays exactly as it is, and you add a second payment.
That matters when the first loan has terms you would not want to replace. It may also matter when a lender’s own score policy is friendlier to your file than agency rules. A lender that keeps the loan can choose a different model or weigh the file differently. That cuts both ways. Some second-lien lenders set a higher floor, not a lower one, so the gap is only an advantage if you confirm it.
That is a lender preference, not a rule.
The tradeoff is cost and complexity. The Consumer Financial Protection Bureau says second mortgages often carry higher interest rates than first mortgages, because the second lender is paid second if the home is sold to pay debts. It also notes that a later refinance can be trickier, since the second lender must agree to stay behind the new loan unless the refinance pays it off.
Edge Cases That Change the Score Used
A few situations shift which number counts.
- Co-borrowers. On agency loans, the lowest borrower’s score drives the loan. Adding a co-borrower can therefore lower the score used, not raise it. The same borrower alone might look stronger.
- Thin or no score. Freddie Mac allows some borrowers with no usable score, with conditions. Under Guide section 5201.1, when the borrower without a score supplies 50% or more of the monthly income, extra payment-reference requirements apply.
- Manual underwriting. A minimum score can apply to some manually underwritten loans, set in each product chapter. On the wholesale conventional programs, manually underwritten loans use 36% or 45% ratios with reserve and score factors from the program’s eligibility matrix, and a 640 floor on an adjustable rate.
- Transition split. Two lenders can legitimately pull different models during the rollout. Trade press reports that lenders outside the limited rollout stayed on Classic FICO until the new model was broadly available.
- FHA and VA. Lenders may add their own requirements on top of program rules, so score floors can differ from one lender to the next.
- Past credit events. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
Scenarios Without the Dollar Figures
A middle-score gap. A borrower sees a score in an app that looks strong. The mortgage lender pulls all three bureaus and takes the middle one, which comes in lower. On a cash-out refinance, that middle score feeds both approval and pricing adjustments. A second-lien lender using a different model may land somewhere else. Neither is wrong; they are measuring differently.
A joint-applicant gap. Two spouses apply together on a cash-out refinance. One has a strong score and the other a weaker one. Agency rules use the lower borrower’s score, so the strong score does not carry the file. If the stronger borrower qualifies alone on income and ratios, applying alone may produce a different result, though that depends on the home’s title, state rules and lender guidelines.
A score lower than expected. A borrower expected a high score and the underwriting score came back lower. The first step is to pull your own reports and check for errors before the next application. Then ask the next lender which model it uses. A wholesale broker can shop the file to lenders set up differently.
A Quick Decision Flow
- Want one payment and are fine replacing the first mortgage? A cash-out refinance fits better.
- Happy with your first mortgage terms and only need a defined amount? A home equity loan is worth pricing.
- Applying with a co-borrower whose score is weaker? Test each product both ways before committing.
- Score borderline? Ask which model each lender uses before any application.
- Using the money to pay off other debts? The CFPB cautions that this moves the debt rather than eliminating it, and your home becomes the collateral.
The CFPB says that depending on the terms, a cash-out refinance may be more or less expensive than a home equity line. No single answer holds for everyone.
Before You Apply: A Short Checklist
1. Pull your own credit reports from all three bureaus and fix errors first.
2. Ask each lender which score model and which bureaus it uses.
3. Ask whether the loan will be sold to an agency or kept by the lender.
4. Group your applications close together so inquiries are treated as shopping.
5. Confirm your combined LTV and ratios on both products before choosing.
Both products use your home as collateral.
Key Terms Defined
Classic FICO: The older credit score model that agency-sold mortgages required for decades.
VantageScore 4.0: A newer score model that lenders may now use on loans sold to Fannie Mae and Freddie Mac.
Tri-merge report: A credit report that combines scores from all three credit bureaus.
Combined LTV (CLTV): All mortgage balances on the home divided by its value.
Second mortgage: A separate loan secured by the home that is paid after the first mortgage if the home is sold.
Seasoning: The minimum time a loan or ownership must have existed before a new loan is reviewed.
Frequently Asked Questions
Does a cash-out refinance or a home equity loan need a higher credit score?
It depends on the lender. A cash-out refinance sold to an agency follows published rules, and the wholesale conventional programs start at a 620 decision score, subject to lender guidelines. A home equity loan follows the lender’s own policy, which can be stricter or looser.
Why is my lender’s score different from the one in my app?
Mortgage lenders pull all three bureaus and use the middle score, often on a different model than consumer apps show. Lenders can also pick between Classic FICO and VantageScore 4.0 on agency loans, so lenders may see different numbers.
Can a co-borrower lower the score used on my loan?
Yes, on agency loans. The lowest borrower’s score becomes the loan’s representative score. A co-borrower can still help with income, so run both versions.
Is a 620 score a universal minimum?
No. Fannie Mae’s automated underwriting dropped its fixed minimum, while manual underwriting, other programs and lender requirements can still differ. The 620 figure here reflects the wholesale conventional programs and varies by lender.
Can I do both a cash-out refinance and keep a home equity loan?
Possibly, but the second lender must agree to stay behind the new first mortgage unless the refinance pays it off. Ask the second lender before you apply.
The Balanced Verdict
Neither product wins on credit alone. A cash-out refinance gives the clearest rules, one payment and, on a primary home, leverage up to 80% LTV, with the no-mortgage-insurance wholesale lane as the one exception to the mortgage-insurance rule above 80%. A home equity loan keeps your first mortgage intact and may be the right move when that loan is worth protecting. The score gap between lenders is real, and the most useful step is asking which model each one uses before you apply.
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.
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
3. FTC – Home equity loans and HELOCs
4. CFPB – Second mortgage / junior lien
6. American Bankers Association Banking Journal
7. CFPB – Loans similar to a HELOC
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 for Borrowing the Maximum Against Your Home · How Lenders Underwrite a Cash-Out Refinance for a Borrower With a 620 Credit Score · How Lenders Underwrite a Cash-Out Refinance on a Paid-Off Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.