The Quick Read: A conventional cash-out refinance replaces your current first mortgage with a larger one and hands you the difference in cash. On a one-unit primary home, the new loan generally tops out at 80% of the home’s value, and the loan must pass a few timing tests. The first mortgage you are paying off must be at least 12 months old, and at least one borrower must have been on title for six months. Credit, ratios, occupancy and appraisal then decide how much cash you can actually reach. All of this is subject to lender guidelines and full file review.
What Does “Cash-Out” Actually Mean?
A cash-out refinance is a new first mortgage that pays off the old one and lets you keep the leftover equity as cash. Fannie Mae’s Selling Guide defines it that way and allows the proceeds to be used for any purpose. The new loan can also roll in closing costs, prepaid items, and older second liens.
That differs from a rate-and-term refinance, also called a limited cash-out. A rate-and-term loan pays off the existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. Because it takes no real equity out, it carries much higher leverage allowances, up to 95% on a one-unit primary home across the programs Lendmire’s wholesale lenders use. Take meaningful cash and the deal works into cash-out territory, with lower leverage and extra pricing adjustments.
Here is a point many homeowners miss. A home with no mortgage still counts. A new loan on a paid-off home is a cash-out refinance under both Fannie Mae and Freddie Mac rules. Owning free and clear does not make it a different product.
Lendmire arranges these through its cash-out refinance programs, working with wholesale lenders as a broker, never as the lender.
Requirements at a Glance
| Requirement | What it means | Typical standard |
|---|---|---|
| Leverage | Max new loan vs. appraised value | 80% on a one-unit primary home |
| Loan seasoning | Age of the loan being paid off | At least 12 months, note date to note date |
| Title seasoning | Time a borrower has been on title | At least 6 months |
| Occupancy | You live in the home | Primary residence |
| Credit | Decision score | 620 wholesale floor |
| Ratios | Total debt to income | Up to 50% on automated findings |
| Appraisal | Sets the value in the LTV math | Required |
Every row is subject to lender guidelines, and a stronger file usually has more room than a borderline one.
How Much Equity Can You Reach?
On a one-unit primary residence, standard conventional cash-out is capped at 80% loan-to-value, so at least 20% equity has to remain after the new loan. Per the Fannie Mae Eligibility Matrix, a two- to four-unit principal residence is capped at 75%. Second homes and investment properties also sit at 75% in the programs Lendmire places. Occupancy decides the leverage, which is the one line this article spends on non-primary property.
One wholesale lane goes further. It reaches 89.99% LTV with no mortgage insurance on a thirty-year fixed, primary residence with a conforming balance. It requires a 680 score and a 50% ratio, plus its own six months of seasoning. That lane is not written in Texas, where the state constitution caps a homestead cash-out at the agency figure. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Why does that matter? Because the cap, not your wish list, sets the ceiling. Run it as a percentage. If your home appraises at a given value, multiply by 80%, subtract your current balance and any liens being paid off, and subtract the costs financed into the loan. What remains is your cash. Costs are real, so the number you reach is smaller than the gross equity math suggests.
The loan also has to stay within the conforming limit. FHFA sets the limits annually, and they are higher in designated high-cost counties. Above the county limit, the loan becomes a jumbo, and the lender sets the rules rather than the agencies. Check your county’s current limit before assuming a conventional loan reaches your target.
How Does the Underwriting Work, Step by Step?
Think of it as a sequence. Each step can stop the file.
1. Choose the right purpose. Taking real equity makes it cash-out. Taking incidental cash only keeps it a rate-and-term loan.
2. Check seasoning. Underwriters test title time and the age of the loan being paid off.
3. Confirm occupancy. You must live in the home.
4. Apply and review disclosures. The Loan Estimate you receive lays out terms, and receiving one is not an approval.
5. Appraise. The appraised value is the denominator in every leverage calculation.
6. Underwrite. Credit, ratios, reserves and LTV are evaluated together by the automated system or manually.
7. Pay off liens. The closing agent pays the old first mortgage and any subordinate liens included in the new loan.
8. Close and wait out rescission. On a primary home, you get a short cancellation window before funds are disbursed.
The Two Seasoning Clocks
Two separate timers run at once, and borrowers often confuse them. The first is time on title. At least one borrower must have been on title for six months before the new loan’s disbursement. The second is the age of the mortgage being paid off, which must be at least 12 months old measured from note date to note date. Fannie Mae introduced that second test through Selling Guide announcement SEL-2023-01, and Freddie Mac applies a matching 12-month test to a first lien being paid off.
Both tests apply. A homeowner who has owned for years but refinanced eight months ago fails the loan-age clock. A homeowner who just bought with cash fails the title clock.
Picture a borrower who bought a home, then refinanced into a new first mortgage nine months later. Years of owning would not matter here. The new loan’s age is the problem, and the cash-out waits until that note is 12 months old. A limited cash-out refinance may be the alternative in the meantime if the goal is only a better structure, not cash.
Exceptions exist:
- Inheritance or legal award. If the lender documents that you inherited the property or were legally awarded it in a divorce, separation or dissolution of a domestic partnership, the six-month title wait does not apply.
- Delayed financing. Someone who bought within the past six months, typically with cash, may be able to take cash out if listed conditions are met, including an arm’s-length original purchase. Fannie Mae’s current rules govern the details, so check the live guide for how the loan amount is limited.
- Co-owner buyout. Some lenders treat a buyout under a legal agreement differently on the 12-month test. Treat that as a confirm-with-your-lender item, not a given.
Where the General Rule Breaks
A handful of situations bend it.
Homes listed for sale. A property that was listed must be off the market on or before the new loan’s disbursement date. Listing it and refinancing as a backup plan does not work.
Delinquent property taxes. Taxes more than 60 days past due can be rolled into the loan, but an escrow account has to be set up unless law prohibits it.
Title held in an LLC. Freddie Mac allows time in an LLC or LP to count toward the six months only if title moves into the borrower’s name on or before the note date.
Manufactured homes. Agency matrices treat them differently. Single-width homes are not eligible for cash-out on a principal residence, and multi-width homes carry their own lower limit. Check the current manufactured housing matrix.
Student loan payoff. Fannie Mae waives the cash-out pricing adjustment when proceeds pay off student loans and listed requirements are met.
Ineligible features. Certain structures, like temporary buydowns or paying off an installment land contract, have historically been excluded from cash-out. Confirm against the current guide.
Some states have special rules. Texas is the clearest example, with its own homestead equity rules, and Lendmire’s wholesale lane with no mortgage insurance is not written there.
Credit, Ratios and Reserves
Across the wholesale conventional programs Lendmire works with, the floor starts at a 620 decision score, with 640 on an adjustable rate under manual underwriting. The automated finding governs most files, and the total ratio ceiling is 50%. Manually underwritten loans are held to 36% or 45%, with reserve and score factors from the Eligibility Matrix.
Reserves enter when ratios stretch. On automated files at Fannie Mae, a ratio above 45% on a cash-out requires six months of reserves. Cash-out loans also draw a loan-level price adjustment based on leverage and credit score. It is built into pricing, not billed as a line item, and a higher score and lower leverage generally reduce it. The agency has aligned credit-score pricing across two scoring models for loans purchased on or after a set date, so check which model your lender uses.
Past credit events carry agency 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.
Because wholesale lenders can set their own overlays on top of agency minimums, a file that one lender turns down may fit elsewhere. That is the main reason borrowers work with a broker.
Appraisal Risk and Mortgage Insurance
The appraisal is where the plan often changes. A lower value shrinks the 80% ceiling, which shrinks your cash dollar for dollar at that percentage. If you are planning around a specific payoff, such as debts or a renovation, build in room for a value that comes in below your expectation.
Mortgage insurance is mostly a non-issue on a standard 80% cash-out, since insurance applies above 80% LTV. If the loan lands above that, it is required, the borrower may request cancellation at 80% of the original value with a good payment history, and the servicer must end it automatically at 78%. Typical published annual premiums run between 0.58% and 1.86% of the balance. That is a range, never a quote. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Is It Worth It? A Decision Framework
Cash-out is a refinance of your whole mortgage, not just a cash withdrawal. That has consequences worth weighing:
- Your existing loan terms go away. The new loan replaces the old rate, term and balance. If your current loan has terms you value, a separate second lien may preserve them, though that is a different product.
- The balance grows. The CFPB’s guide to using home equity warns that a cash-out can lengthen the payoff time and raise the monthly payment, and notes that no equity option converts 100% of equity into cash.
- Costs are real. Closing costs, points and prepaids can be financed into the loan, which is convenient, but financed costs still increase the balance. Small cash amounts can be eaten up by the cost of replacing the entire loan.
- Debt consolidation carries risk. CFPB research found paying off other debts was a common reason for taking cash out, with home repairs second. The CFPB report also notes that paying non-mortgage debts with mortgage debt can raise the risk of foreclosure.
A reasonable test: if the purpose produces lasting value, such as a repair that protects the home or retiring costly debt you will not rebuild, cash-out can make sense. If the need is short-term spending, think hard first. How does the new loan compare with your current one? That comparison is the actual decision.
Compare the main options side by side:
| Option | How it works | Best fit |
|---|---|---|
| Cash-out refinance | Replaces first mortgage, pays you the difference | Larger cash needs, rethinking the whole loan |
| Rate-and-term refinance | Replaces first mortgage, little cash back | Restructuring without taking equity |
| Home equity loan or HELOC | Separate lien behind your first mortgage | Keeping a first mortgage you like |
Closing: The Rescission Window
On a refinance of your primary home, you have three business days to cancel. The CFPB explains that the clock starts only after you sign the note, receive the accurate Truth in Lending disclosure, and receive two copies of the rescission notice. Cancellation must be in writing; a phone call is not enough. Funds are generally disbursed after that window ends. This right applies to your principal dwelling, not a vacation home or rental.
Waiving the window is allowed only for a genuine personal financial emergency, with your own dated, signed statement.
Document Checklist
Gather these before applying, since missing paperwork stalls files:
- Recent pay documentation and traditional personal-income documentation, or other proof of income
- Statements for the current mortgage and any second liens
- Homeowners insurance declarations and a recent property tax bill
- Asset statements covering reserves if ratios run high
- Proof of how you came to own the home, if inherited or awarded
- A listing cancellation record, if the home was ever on the market
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
LTV (loan-to-value): The new loan balance divided by the home’s appraised value.
Seasoning: The time you have owned the home or held the existing loan before a refinance is allowed.
Note date: The date the borrower signs the mortgage note, used to measure loan age.
Limited cash-out refinance: A refinance that pays off the first mortgage and costs, with only incidental cash back.
Loan-level price adjustment: A pricing charge built in by leverage and credit score, not billed as a separate fee.
Conforming limit: The maximum loan size the agencies will buy in a given county. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Frequently Asked Questions
How long do I have to own my home before a cash-out refinance?
At least one borrower generally needs six months on title. If an existing first mortgage is being paid off, that loan must also be at least 12 months old. Inheritance and legal awards, such as divorce, waive the title wait, and delayed financing offers a path for some recent cash purchases.
Can I take cash out of a home with no mortgage?
Yes. A new loan on a paid-off home is treated as a cash-out refinance by both Fannie Mae and Freddie Mac. The same leverage limits, appraisal, credit and ratio tests apply, and the six-month title requirement still matters.
How much of my equity can I actually get?
On a one-unit primary home, the new loan is capped at 80% of appraised value, so at least 20% equity remains. Two- to four-unit primary homes are capped at 75%. Costs and payoffs come out of that ceiling first, so your net cash is smaller than the raw equity figure.
Can I cancel after I sign?
Yes, on a primary home you have three business days to cancel in writing. The clock begins only after you have signed, received the proper disclosures and received two copies of the rescission notice. Phone calls do not count.
What if my home is listed for sale?
It must be off the market on or before the disbursement date of the new loan. A home still listed at that point is not eligible for cash-out.
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. Speak with a loan officer about your own file; all figures are subject to lender guidelines and full file review and are not a commitment to lend.
For related reading, see Lendmire’s explanation of conventional cash-out requirements on a 2-4 unit primary home and its definition of a conventional cash-out refinance.
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 Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Freddie Mac Seller/Servicer Guide 4301.5
3. Fannie Mae Eligibility Matrix
4. FHFA sets the limits annually
5. Fannie Mae Selling Guide Announcement SEL-2023-01
6. CFPB’s guide to using home equity
7. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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: Can a Paid-Off Inherited Home Get a Conventional Cash-Out Refinance? · Conventional Cash-Out Refinance Requirements on a Paid-Off Home · Conventional Cash-Out Requirements for a Live-in 2-4 Unit Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.