The Quick Read: You replace your current first mortgage with a new, larger one that meets standard agency size and underwriting rules, and you keep the difference in cash. On a one-unit home you live in, the new loan generally tops out at 80% of the appraised value. The lender checks your credit, your debt load, the age of your current loan, and how long you have owned the home. Cash comes after closing and after a short cancellation window.
Key Takeaways
- The new loan pays off your old first mortgage, any liens you choose to clear, and the closing costs. What is left is your cash.
- Leverage tops out at 80% on a one-unit primary residence and 75% on a two- to four-unit primary residence.
- Two clocks apply: your current loan must be at least 12 months old, and a borrower must have been on title for 6 months. Named exceptions exist.
- A wholesale credit floor of 620 applies, and the automated ratio ceiling is 50%. Lender guidelines and full file review decide the rest.
- Your old loan and its terms are gone. That trade is the real decision.
What Makes a Cash-Out Refinance “Conforming”?
“Conforming” means the loan fits the size limit and the underwriting rules of the two companies that buy most home mortgages. A loan above the county limit is a jumbo loan. It follows a different set of rules.
A cash-out refinance is a new first mortgage that pays off your existing mortgage and gives you extra money. You can use the cash for repairs, debt payoff, or anything else. The lender does not police the purpose, though the file still has to qualify on credit, income, and ratios.
It helps to know what it is not. A limited cash-out refinance, often called rate-and-term, pays off your first mortgage, closing costs, and a purchase-money second lien. You get only incidental cash back. That product allows more leverage: 95% on a one-unit primary residence, or 97% when the existing loan is agency-owned and the first-time-buyer program allows. Once you take meaningful cash, the loan is a cash-out loan. That means the 80% cap, the waiting periods, and a price adjustment tied to credit and leverage.
Lendmire’s cash-out refinance programs sit in this conforming lane. Lendmire is a mortgage broker. It arranges these loans through wholesale lenders, and every program is subject to lender guidelines and full file review.
One more trap: a home with no mortgage still counts. If you own it outright and put a new first mortgage on it, the agencies treat that as cash-out. People are often surprised by this, and it matters for leverage and pricing.
How Much Cash Can You Actually Get?
Take the lower of two limits: 80% of the appraised value on a one-unit primary home, or the conforming loan limit for your county. Then subtract your payoff, any other liens, and the financed costs. What remains is your cash.
The agency Eligibility Matrix applies the cap to loan-to-value (LTV), combined LTV (CLTV), and home-equity combined LTV (HCLTV) at once. In plain words, every lien on the home counts toward the cap. A second mortgage you keep eats into your room.
Occupancy and unit count change the cap. Across the wholesale programs Lendmire places files with, a one-unit primary home gets 80%. A two- to four-unit primary residence gets 75%. A second home or investment property also gets 75%. Occupancy decides the leverage, so say honestly how you live in the home.
If you own a duplex or fourplex and live in one unit, see Lendmire’s piece How Much a Cash-Out Refinance Returns on a 2-4 Unit Primary Home.
A Worked Example
Picture a home that appraises at 100% of its own value. Here is how the room shrinks as your balance grows.
| Scenario | Payoff plus other liens | Room under the 80% cap |
|---|---|---|
| Low balance | 30% of value | 50% before costs |
| Mid balance | 55% of value | 25% before costs |
| Higher balance | 70% of value | 10% before costs |
Financed closing costs and prepaid items come out of that room too. They are paid out of the new loan, so they shrink your net cash. Run this math before you decide how much you need.
Now the second limit. In a pricey home, the dollar limit can bind before the percentage does. Say 80% of the value comes out above your county’s conforming limit. Your cash is the limit minus payoff, liens, and costs. The FHFA sets the limit each year, with a baseline for most counties and higher figures in designated high-cost areas. It also publishes a county list. Check your county there. A loan above it moves to the jumbo lane.
Who Qualifies? The Eligibility Checklist
Think of five checks: credit, ratios, income, occupancy, and the appraisal. Each one can cap your loan or stop it.
Credit. The wholesale conventional programs Lendmire works with start at a 620 decision score. Some lenders set a higher floor. A higher score also lowers the price adjustment that cash-out loans carry, which varies with score and leverage.
Ratios. Your debt-to-income ratio (DTI) adds your new housing payment to your other monthly debts, then divides by your gross income. The automated underwriting finding governs most files, with a total ceiling of 50%. On a cash-out file the automated ceiling can sit lower. Manually underwritten loans use 36%, or 45% when you meet the score and reserve factors in the matrix. At higher ratios, expect the lender to ask for more reserves.
Income. Salaried borrowers document pay and employment. Self-employed borrowers document the business income. Either way, the lender wants income that is stable and likely to continue.
Occupancy. On a primary residence, the borrowers must live in the home. Freddie Mac’s Guide Section 4301.5 says all borrowers must occupy it. You certify that at closing. A home you are about to convert to a rental is a red flag, so do not sign the certification casually.
Appraisal. Cash-out loans are generally appraised. The appraised value, not your own estimate, sets the LTV. A low appraisal cuts the loan amount, and it can end the deal.
The Two Waiting-Period Clocks
Two separate clocks apply, and most borrowers only think about one. Fannie Mae’s Selling Guide topic B2-1.3-03 sets both for cash-out loans.
| Clock | What it measures | The rule |
|---|---|---|
| Loan age | The first mortgage being paid off | At least 12 months, note date to note date |
| Title | Time as an owner | At least one borrower on title for 6 months |
The loan-age clock does not apply to second liens you pay off. Nor does it apply to buying out a co-owner under a legal agreement. A second lien of any age can be paid off through the refinance.
The title clock has exceptions. There is no waiting period when you inherited the home or were legally awarded it, as in a divorce. A separate delayed-financing option covers a recent cash purchase. It requires an arm’s-length purchase and documented sources of funds, and it still counts as cash-out for leverage and pricing.
Freddie Mac’s guide lets time held in an LLC or LP count toward the six months in some cases. At least one borrower must have been the majority owner or in control of the entity.
One rule trips up sellers-turned-stayers. If you listed the home for sale, it must be off the market on or before the date the loan funds.
The Step-by-Step Process
1. Screen yourself. Confirm occupancy, loan age, time on title, and listing status.
2. Apply. You give your name, income, Social Security number, property address, a value estimate, and the loan amount you want. The lender then issues a Loan Estimate.
3. Document the file. The lender pulls credit and collects income, asset, and debt records.
4. Appraisal. The appraised value sets the LTV and caps the loan.
5. Underwriting. Automated or manual underwriting reviews the whole file. New debt, or a new lien on the home, forces a re-run. If your ratio climbs past the ceiling after that, the loan no longer fits.
6. Closing Disclosure. You receive it ahead of closing. Compare it line by line with your Loan Estimate.
7. Sign, wait out the cancellation window, then fund. Your old loan is paid off, and the balance goes to you.
Plan your contractor deposits and debt payoffs around the funding date, not the signing date.
Special Situations and Variations
The 89.99% lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. The terms are narrow: a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, and a conforming balance. It carries its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, so that lane is not written there. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Mortgage insurance. At 80% LTV or below, a standard cash-out needs none. Above 80% it applies. You can request cancellation at 80% of the original value with good payment history, no subordinate liens, and no decline in value. The servicer must end it automatically at 78%. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Student loan payoff. One agency option lets you pay off student loan debt through the refinance. A waiver of the cash-out price adjustment may apply if you meet the requirements in B2-1.3-03.
Property-assessed clean energy (PACE) loans. If you want to pay off a PACE obligation with your proceeds, it must be paid in full.
Co-owner buyouts. A special-purpose cash-out lets you buy out a former spouse or partner. It skips the loan-age clock.
Self-employed or rental-income borrowers. The lender looks at documented, continuing income. Be ready for extra paperwork.
What Does the Cash Really Cost?
A cash-out refinance replaces your entire first mortgage. That has four consequences.
- Closing costs apply to the whole new balance. You are not paying them only on the cash you take.
- Your old terms are gone. You get a fresh term and a new payment. Your old rate and remaining years do not carry over.
- The price adjustment depends on credit and leverage. Cash-out loans carry a risk-based adjustment that varies with score and LTV. In practice it is built into the pricing or paid at closing. Taking more equity than you need pushes leverage up and can push cost up.
- The new payment feeds your DTI. A bigger loan raises your ratio, which can cap the amount.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Cash-Out vs. the Alternatives
| Option | What it does | Best when |
|---|---|---|
| Cash-out refinance | Replaces your first mortgage, pays you the difference | You want one loan and your current terms are not worth keeping |
| Rate-and-term refinance | Replaces your first mortgage, little or no cash | You want a new loan or term, not cash |
| Second loan or HELOC | Adds a loan, keeps your first mortgage | Your current first mortgage terms are worth keeping |
This is a genuine toss-up for many homeowners. If your existing first mortgage is one you would hate to lose, a smaller second loan can protect it. If you were going to refinance anyway, taking cash at the same time can make sense. Compare the full cost of replacing the whole loan against the amount of cash you need. Do that before you choose.
The Right to Cancel
On a primary residence, you generally have a right to cancel for a short window after signing. The CFPB explains the rule. Cash is not released until that window ends. If you cancel, you still owe your original loan. If the lender fails to give you the required disclosures or notices, you may be able to cancel for much longer. The rule has been under public review, so confirm the current terms with your lender. For the full mechanics, see Lendmire’s guide to the right of rescission on a primary home.
Why Cash-Out Files Stall
Most delays trace to a short list of causes.
- A low appraisal. The cap applies to the lower value.
- A ratio spike. The new, larger payment can push your DTI past the ceiling.
- Title or lien surprises. An unexpected second lien counts toward the cap.
- Seasoning misses. A recent purchase or recent refinance can leave you short on one clock.
- Occupancy problems. A home that looks like a rental does not fit the primary-residence lane.
Most of these are fixable before you apply. Count the months on both clocks first.
Key Terms Defined
LTV (loan-to-value): The loan amount divided by the appraised value of the home.
CLTV (combined LTV): The total of all liens on the home divided by its appraised value.
Seasoning: The waiting period tied to your loan’s age or your time on title.
Note date: The date you signed the promissory note for a loan.
Price adjustment: A risk-based pricing charge that varies with credit score and leverage.
DTI (debt-to-income): Your monthly debts, including the new housing payment, divided by gross monthly income.
Where to Go From Here
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.
Frequently Asked Questions
How much equity do I have to leave in the home?
At least 20% on a one-unit primary residence, because the cap is 80%. On a two- to four-unit primary residence, you leave at least 25%. Other liens count toward the same cap.
Can I do a cash-out refinance right after buying?
Usually not. Your existing first mortgage generally must be 12 months old, and one borrower must have held title for 6 months. Exceptions exist for delayed financing, inheritance, and legal awards. Each one has its own requirements.
Does a home I own outright count as a cash-out?
Yes. A new first mortgage on a home with no existing lien counts as cash-out. Leverage and pricing follow cash-out rules.
Is mortgage insurance required on a cash-out refinance?
Not at the standard 80% cap. Mortgage insurance applies above 80% LTV. It cancels on request at 80% of the original value and ends automatically at 78%, under the stated conditions. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Does the conforming loan limit cap my cash?
Yes, it can. The new loan cannot exceed the limit for your county, even if 80% of your value is higher. The FHFA publishes the county list each year.
For your own numbers, request a scenario review with Lendmire.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Eligibility Matrix
2. FHFA, Conforming Loan Limit Values
3. Freddie Mac Guide Section 4301.5
4. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Should You Keep Your Cash-Out Refinance Under the Conforming Limit? · Should You Trim a Cash-Out Refinance That Crosses the Conforming Limit? · Conventional Cash-Out Refinance Requirements on a 2-4 Unit Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.