The Quick Read: No, you don’t make a down payment on a cash-out refinance, because you already own the home. Equity, the part of the home’s value you own outright, takes the place of a down payment. The lender caps the new loan at a share of the appraised value, and the slice you leave unborrowed works like a required down payment. You may still need cash for an appraisal and closing costs, subject to lender guidelines.
Key Terms Defined
Six terms come up in almost every cash-out conversation. Here they are in plain words.
- Loan-to-value (LTV): the new loan balance divided by the home’s appraised value. An 80% LTV means the loan covers 80% of value.
- Cash-out refinance: a new, larger mortgage that pays off your old one and hands you the difference in cash.
- Rate-and-term refinance: a new mortgage that changes your rate or term and pays off the old loan, with only incidental cash back.
- Cash-in refinance: a refinance where you bring money to closing to shrink the balance.
- Seasoning: the waiting period a lender requires before you can refinance, measured in ownership time or the age of your current loan.
- Delayed financing: a cash-out exception for people who bought a home with cash and want to borrow against it soon after. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Why Doesn’t a Refinance Need a Down Payment?
A down payment is the cash you put in to buy a home you don’t own yet. In a refinance, you own the home. Your ownership stake is already sitting in the property, so the lender asks you to leave part of it in place.
Here is the practical version. You set the home’s value at 100%. The program sets a maximum LTV. Whatever sits between that maximum and 100% is the cushion you keep. You never write a check for it. You simply can’t borrow it.
That cushion is why the answer to the title question is no. It is also why the real question becomes “how much equity do I have?” Lendmire is a mortgage broker, not a lender, and each lender reviews the full file.
If you want to see how these loans are built, start with Lendmire’s cash-out refinance programs. The mechanics below apply whichever program you land on.
One more point. A free-and-clear home (no mortgage at all) is still a cash-out refinance when you borrow against it. No existing loan to pay off doesn’t change the category.
A Worked Example in Percentages
Run the numbers on a home you owe 55% of its value on, using an 80% maximum LTV. These are modeled assumptions, not market data.
- Value: 100%.
- Maximum loan at 80% LTV: 80% of value.
- Payoff of your current mortgage: 55% of value.
- Cash available before costs: 25% of value. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Now the part most explainers skip. Closing costs come out of that 25% if you roll them into the new loan. If you pay them at the table, you keep more cash but you hand over money at closing. Either way, the cash you actually see is lower than the headline number.
Change the scenario. Say you owe 78% of value. The 80% cap leaves a sliver of about 2% before costs. That is rarely worth a new loan. Say you owe 85%. A cash-out is off the table at that cap, though a refinance may still work.
The appraisal can move everything. If the home appraises below what you expected, the 80% applies to a smaller number. Your cash shrinks, sometimes to zero. Plan around a conservative value, not your best guess.
How Much Equity Does Each Program Require?
Equity requirements depend on the program and on how you use the home. For conventional loans, Fannie Mae’s eligibility document lists maximum LTV ratios by occupancy. These figures are guidelines and vary by lender and file.
| Property and use | Cash-out max LTV |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
| Investment property | 75% |
A single line is enough for the last two rows. Occupancy decides the leverage, and the home you live in gets the highest cap.
Compare that with rate-and-term. A conventional rate-and-term refinance on a one-unit primary residence can reach 95% LTV, and 97% where the existing loan is agency-owned and a first-time-buyer program allows it. Cash-out is stricter because you’re taking money out. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Three other lanes matter.
A higher-leverage wholesale option. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming balance, and its own six months of seasoning. In Texas, the state constitution caps cash-out on a homestead at the agency figure, so that lane isn’t written there. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
FHA. FHA sets its own cash-out cap, and it sits below its rate-and-term limits. Any other lien that stays on the home counts toward that cap. FHA rules are set in HUD’s Handbook 4000.1, and the lender confirms the current numbers on your file.
VA. This is the one place a down payment can enter. On the VA’s cash-out refinance page, a loan with no down payment can reach up to the conforming loan limit in most areas, and more in some high-cost counties. You can borrow above that amount if you make a down payment. VA cash-out also requires a Certificate of Eligibility, credit and income that meet VA and lender standards, and your intent to live in the home.
Mortgage insurance is a separate piece. On conventional loans it applies above 80% LTV. You can ask to cancel it at 80% of the original value with good payment history, no subordinate liens and no drop in value. The servicer must end it automatically at 78%. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Do You Ever Need Cash at Closing?
Sometimes. Not a down payment, but real costs.
- The appraisal. A new appraisal is part of conventional and FHA cash-out loans, and VA cash-out needs its own. Plan for that expense up front.
- Closing costs. These are fees for the loan and the title work. You can pay them at closing or roll them into the balance. Rolling them in leaves you with less cash and a larger loan.
- Reserves. Some files need money left in the bank after closing. The requirement depends on the program and the file.
Here’s the catch with “roll everything in.” It works only if the numbers leave room under the LTV cap. If the cap is already tight, costs that can’t be rolled in must come from your pocket.
Be wary of marketing that promises a refinance with no costs. The costs are still there. They’re built into the loan balance or the pricing, and your Loan Estimate shows where they land.
What about cash-in? That’s the opposite move. You bring money to closing to cut the balance, often to reach a lower LTV or to remove mortgage insurance. It’s the closest thing to a “down payment” in a refinance, and it’s your choice, not a requirement.
What Else Does the Lender Check?
Equity gets you in the door. It doesn’t get you approved. Cash-out files get a full review, not a streamlined one.
- Credit. The wholesale conventional programs start at a 620 decision score. The automated finding governs most files, and some lenders set a higher floor.
- Income and debts. The total ratio ceiling is 50% on most files. Manually underwritten loans use tighter ratios, at 36% or 45%. A bigger loan means a bigger payment, and the lender tests it against your income.
- Credit events. Agency waiting periods apply after major events: 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.
- Seasoning. For conventional cash-out, the first mortgage being paid off must be at least 12 months old, counted note date to note date. At least one borrower must have been on title for six months.
Two exceptions are worth knowing. Delayed financing lets a cash buyer borrow against a recent purchase. Fannie Mae’s Selling Guide allows it when the purchase was arm’s-length and the settlement statement shows no mortgage financing. It is still treated as a cash-out refinance, so cash-out pricing applies. Inherited homes and legal awards also carry exceptions to the title wait.
Equity alone doesn’t clear a file. A borrower with 40% equity and a thin payment history can still get a no. Many cash-out requests that look easy on equity stall on credit or ratios.
Can You Use the Cash as a Down Payment Somewhere Else?
Yes, the proceeds can go toward whatever you choose. Some borrowers use them to buy a vacation home or a second residence. If that’s your goal, Lendmire’s piece How Much Second Home Down Payment a Cash-Out Refinance Funds walks through the sizing.
One practical flag. You’re now carrying a larger mortgage on the home you live in, plus the new purchase. Lenders review both obligations. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
What If You Don’t Have Enough Equity?
You have choices. None of them involves a down payment.
Wait. Payments lower your balance, and prices can move your value. Equity builds from both.
Bring cash in. A cash-in refinance can push your LTV under the cap. Run it only if you keep a healthy cash cushion afterward.
Use a streamline instead. Streamlines are rate-and-term loans for people with existing government mortgages. They are not cash-out.
- FHA Streamline: for an existing FHA loan. It has limited credit review, a net tangible benefit test, and no appraisal on the no-appraisal version. With an appraisal, FHA rate-and-term can reach 97.75% LTV. HUD’s streamline document caps the cash back at closing at a small amount.
- VA IRRRL: for an existing VA loan. It carries a 0.5% funding fee unless you’re exempt, needs no VA appraisal, applies a net tangible benefit test, and has its own seasoning wait that counts both time and payments. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Neither pays out meaningful cash. If someone tells you a streamline will fund a big project, push back.
Consider a different product. A home equity line or loan leaves your first mortgage alone. That’s a different conversation from cash-out, with its own tradeoffs.
What Are the Risks?
A cash-out replaces your mortgage with a larger one. That has costs beyond fees.
CFPB’s guide on using home equity notes that a cash-out refinance may lengthen your payoff time and raise your monthly payment, since the new loan is bigger. The same guide says lenders typically want you to keep a meaningful share of your home’s value as equity. Your rate and terms change too.
There’s also a quiet risk. Paying off credit cards with home equity moves unsecured debt onto your house. If payments become hard, the home is on the line in a way the cards weren’t. A cash-out rarely lowers the monthly payment, so be cautious if anyone claims otherwise.
Frequently Asked Questions
Do I need a down payment on a cash-out refinance?
No. You already own the home, so equity does the job a down payment does in a purchase. The lender limits the new loan to a share of the appraised value and you leave the rest unborrowed. You may still pay for an appraisal and closing costs.
Can I roll closing costs into a cash-out refinance?
Often yes, when the total stays under the program’s LTV cap. Rolling costs in raises the balance and reduces the cash you receive. If the cap is tight, you may have to pay some costs at closing. Your Loan Estimate shows the details.
How soon after buying can I do a cash-out refinance?
On conventional loans, at least one borrower generally needs to be on title for six months, and the mortgage being paid off must be at least 12 months old. Delayed financing, inheritance and legal-award exceptions exist. Each is subject to lender guidelines and full file review.
Is a cash-in refinance the same as a down payment?
Not quite. A cash-in refinance is optional money you bring to reduce the balance or reach a target LTV. A down payment is a required piece of a purchase. They feel similar, but a refinance doesn’t demand either.
What if my appraisal comes in low?
The maximum loan shrinks, because the LTV cap applies to the lower value. Your cash proceeds drop, and the deal may no longer work. Some borrowers wait, pay down the balance, or switch to a rate-and-term refinance.
Next Step
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. Every program is subject to lender guidelines and full file review, and nothing here is a commitment to lend. Equity numbers are easy to estimate and easy to get wrong, so run yours against a lender’s appraisal-based cap before you plan around the cash.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Eligibility Matrix document
2. VA.gov: Cash-out refinance loan
3. Fannie Mae Selling Guide: Cash-Out Refinance Transactions
5. CFPB: Using home equity guide
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Does a 2-4 Unit Primary Home Cash-Out Refinance Need a Full Appraisal? · How to Close a Large Cash-Out Refinance Without Conditions · Primary vs Second Home Cash-Out Refinance for a Down Payment
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.