The Quick Read: A standard conventional cash-out refinance gives you a share of what the house is worth today, not what it will be worth after the work. On a one-unit primary residence the cap is 80% of current appraised value, and your old mortgage comes out of that first. On a gut job, today’s value is the weakest number in the file, so the cash often falls short of the budget. Renovation-specific loans size on the finished value, but they are limited or no cash-out products.
The Short Formula
Maximum new loan = appraised value × LTV cap. Cash to you = that loan, minus the payoff of your current mortgage, any other liens counted in the ratio, and financed costs.
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.
The cap is a share of the home’s value, not of your equity. That difference trips people up. Eighty percent of value already includes everything you still owe.
Here is the catch on a gut renovation. The appraiser values the house as it sits. A home with no kitchen, open walls and stripped systems appraises low. A low appraisal shrinks the loan, and the cash shrinks with it.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
As-is value: What the home is worth in its current condition, before any work.
As-completed value: An appraiser’s estimate of what the home will be worth after the planned renovation is finished.
Seasoning: The minimum time you have held the home or the existing loan before a cash-out is allowed.
Limited cash-out: A refinance that pays off the existing loan and costs, with only small incidental cash back.
How a Conventional Cash-Out Is Underwritten, Step by Step
1. Classification. The lender sorts the refinance as cash-out or limited cash-out. Fannie Mae’s Selling Guide section on cash-out refinances draws that line and sends readers to its Eligibility Matrix for the leverage caps.
2. Leverage cap. Per the Fannie Mae Eligibility Matrix, a cash-out on a one-unit principal residence tops out at 80%. Two- to four-unit principal residences, second homes and investment property carry a 75% cap on the wholesale programs. Occupancy sets the leverage.
3. Appraisal. A standard cash-out uses the as-is value. Nothing in the loan credits the finished kitchen or the new roof you have not built yet.
4. Seasoning check. The first mortgage being paid off must generally be at least 12 months old, note date to note date, and a borrower must have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist.
5. Credit and ratios. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45% ratios, with the reserve and score factors in the Eligibility Matrix.
6. Mortgage insurance and pricing. Mortgage insurance applies above 80% LTV on the agency path, except the wholesale no-MI cash-out lane covered below. A cash-out also carries loan-level price adjustments tied to LTV and credit score. Those are the lender’s mechanics; they show up on your Loan Estimate. Guidelines, property type, leverage, and credit profile all apply.
The full list of Lendmire’s cash-out refinance programs is on its program page. None of this is a commitment to lend.
Why a Gut Renovation Breaks the Standard Answer
A gut job strips the home to studs, so the as-is appraisal is at its lowest just when the money is most needed. Two problems stack up.
The value problem. The 80% cap applies to a number that reflects a half-demolished house. If you plan to start the work before the refinance, the appraisal reflects the demolition. If you refinance first, the cash arrives, but it was sized on the house in its old condition.
The budget problem. Gut renovations run large relative to the house’s value. A cash-out sized on current value may cover only part of a contractor’s bid, and the bid is not the whole budget. Contingency, permits and temporary housing come on top.
A cash-out also does not lend against the finished value. Only renovation products credit the as-completed number, and that leads to the next section.
Renovation Products: Bigger Credit for the Finished Value, Limited Cash
Renovation-specific conventional loans appraise the home “as completed,” using the plans and contractor estimate. The tradeoff is that they are not cash-out loans.
| Feature | Standard cash-out | HomeStyle Renovation | CHOICERenovation |
|---|---|---|---|
| Value used | As-is | As-completed | As-completed |
| Cash-out? | Yes | No cash-out option | Treated as no cash-out |
| Funds held | Paid at closing | Custodial account, draws | Custodial account, draws |
| Best for | Cash needs | Funded renovation | Funded renovation |
On a refinance, Fannie Mae’s HomeStyle Renovation page says the loan must go to a purchase or a limited cash-out refinance, with “no cash-out refinance option,” and covers up to 75% of the as-completed appraised value. The home must be an existing home, not new construction, and the hazard insurance has to cover the completed value. Renovations must be permanently affixed and meet local building codes.
Freddie Mac’s version works the same way in substance. Its CHOICERenovation fact sheet lists purchase and no cash-out refinance, and Freddie Mac’s Guide section 4301.5 treats a CHOICERenovation loan as no cash-out when the proceeds finance only eligible renovations.
How the draw process runs, per Fannie Mae’s lender page:
1. The lender orders the as-completed appraisal.
2. Borrower and lender sign a Renovation Loan Agreement at closing.
3. The renovation money goes into a custodial account.
4. The lender manages the draws as work is completed.
5. A final inspection follows, and the appraiser signs a completion certificate.
That means the renovation fund is not paid to you at closing. It is released in stages. The file also carries more paper: plans and specifications, the as-completed appraisal, the renovation contract and the agreement itself.
Where the General Rule Breaks
A few named edge cases change the answer.
- Freddie Mac seasoning exception. Freddie Mac’s 12-month seasoning rule for a cash-out has a listed exception for Renovation Mortgages, plus one for refinancing a HELOC, per the Guide’s 4301.5 page.
- Owned free and clear. A new mortgage on a home you previously owned outright counts as cash-out.
- Manufactured homes. HomeStyle covers up to 50% of the as-completed value on a manufactured home. Cash-out Renovation Mortgages must not be secured by manufactured homes.
- Condition problems. Some lenders add a second-level review on homes rated in the poorest condition category. That is a lender overlay, not agency policy, so it varies by lender.
- Occupancy. A gut job that leaves the home unlivable can complicate occupancy. Some programs require the borrower to live in the home, and lenders look at this closely when the house has no working kitchen or bath.
- Texas homesteads. A cash-out on a Texas homestead is capped at 80% of the home’s value by the state constitution. The no-MI wholesale lane described next is not written there.
The Wholesale No-MI Lane
One lane is an exception to the eighty-percent rule. A wholesale lane reaches 89.99% LTV with no mortgage insurance, at a 680 score and a 50% ratio, on a thirty-year fixed, primary residence, conforming balance. Its own six months of seasoning applies to this lane, in place of the 12-month first-mortgage rule that governs a standard cash-out. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
On a home that is already in good shape, that lane can lift the cash well above the standard cap. On a gut job, it still sizes on the as-is appraisal, so the same low-value problem applies. Higher leverage on a lower number does not always beat a renovation product.
Sizing the Cash to the Project
Several scenarios show how the logic runs. These are modeled assumptions, described in percentages, not dollar figures.
Low equity. A homeowner owes close to 70% of today’s as-is value. At an 80% cap, the room is about 10% of value, before costs. That rarely covers a gut job. A renovation product, which credits the finished value, is the stronger fit.
Moderate equity. The balance is near half of as-is value. The 80% cap leaves roughly 30% of value in play. That may fund a partial gut or one phase. A full gut still depends on the bid.
High equity. The home is owned free and clear or nearly. A cash-out sized at 80% of as-is value may cover a large part of the project, since nothing is being paid off. Note that a new mortgage on a free-and-clear home counts as cash-out.
Build the budget in this order:
1. Start with the contractor’s signed bid.
2. Add a contingency cushion for surprises behind the walls.
3. Add permits and design fees.
4. Add temporary housing if you cannot live there.
5. Subtract nothing for hope. Costs only move one way on a gut job.
Then compare the total to the cash left after payoff, other liens and financed costs. If the cash is short, you have a gap, and the next section is about closing it.
Gut-Job Fit Test
A standard cash-out fits better when:
- The home is livable and appraises well as-is.
- The project can be phased, with each phase funded separately.
- You have large equity and a small payoff.
- You want the cash at closing, not in draws.
A renovation product fits better when:
- The as-is value is far below the finished value.
- The budget is large relative to today’s value.
- You are comfortable with a custodial account and inspections.
- You can accept limited or no cash-out.
What If the Cash Is Not Enough?
Options, in plain terms:
1. Phase the work. Do structure, systems and envelope first, then refinance or borrow again for finishes.
2. Switch products. A renovation loan sized on the finished value may cover more than a cash-out on the as-is value.
3. Add a second source. The CFPB’s guide to using home equity compares cash-out refinances, home equity loans and HELOCs. Each turns equity into a debt you must repay.
4. Scale the scope. A smaller first pass may fit the cash you can actually reach.
Over-budget risk is real. On a draw-based loan, the money sits in the custodial account, so confirm how change orders are handled before you sign. Do not assume the amount can be raised later.
Equity also matters. The Federal Reserve’s refinancing page notes that a cash-out means you own less of your home. A cash-out may reset the term, too, and extend the time to repay.
Mortgage Insurance and Tax
Above 80% LTV on the agency path, mortgage insurance applies, except the no-MI wholesale lane above. You may 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%. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is a program-sheet range, not a quote. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Frequently Asked Questions
Can a conventional cash-out refinance lend against my home’s value after the renovation?
No. A standard cash-out uses the current appraised value. Only the renovation products, HomeStyle and CHOICERenovation, size on the as-completed value, and they are limited or no cash-out loans.
What is the maximum LTV on a conventional cash-out for my primary home?
It is 80% on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property carry 75%. A wholesale no-MI lane reaches 89.99% on a primary residence at a 680 score, subject to lender guidelines.
Is the 80% cap a share of my equity?
No. It is a share of the home’s value, and the payoff of your current loan and any other counted liens come out of it. What remains is your cash, less financed costs.
Do I have to wait before I can do a cash-out?
Usually. The mortgage being paid off must be at least 12 months old, and a borrower must have been on title for 6 months. Freddie Mac lists an exception for Renovation Mortgages.
Can I refinance a home that is torn up or in poor condition?
It depends on the program. The appraisal reflects the condition, so the value and the cash drop. Some lenders review poor-condition homes more closely, and occupancy rules can matter if the home is unlivable. A renovation product with an as-completed appraisal is often the better path.
What the Decision Looks Like
If the house is livable and equity is deep, a standard cash-out may fund the job. If the house is a shell and the budget is large, the as-is appraisal usually caps the cash too low, and a renovation product fits better. 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.
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.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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. Fannie Mae Selling Guide, B2-1.3-03 Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae HomeStyle Renovation
4. CHOICERenovation fact sheet
5. Freddie Mac Guide, Section 4301.5
8. CFPB, Using home equity to meet financial needs
9. Federal Reserve’s refinancing page
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 an Appraisal Sizes a Conventional Cash-Out Refinance · How PMI Works on a Conventional Cash-Out Refinance · How Much a Conventional Cash-Out Refinance Lends Inside Seasoning
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.