The Quick Read: On a conventional loan, the cap is on the new loan, not on a share of your equity. A one-unit primary home tops out at 80% of its appraised value, and a two- to four-unit home at 75%. Your cash is that cap minus what you still owe, minus any liens that get paid off and any costs rolled into the loan. Credit, income, and the appraisal can pull the number lower, subject to lender guidelines and full file review.
Key Takeaways
- The cap is a loan-to-value (LTV) limit on the whole new mortgage. It is not a percentage of your equity.
- Cash to you equals the cap amount, minus your payoff, minus other liens, minus financed costs.
- Conventional cash-out reaches 80% on one unit and 75% on two to four units. FHA cash-out also stops at 80%.
- A rate-and-term refinance reaches higher leverage (95% on a one-unit primary home), but it pays off the old loan and gives back almost no cash.
- Hitting the cap does not mean approval. The appraisal, credit, income, and seasoning all set the final number.
Equity vs. the Loan Cap: Where Homeowners Get Tripped Up
The most common mistake is thinking you can borrow “80% of your equity.” You can’t. Lenders apply the percentage to the home’s value, and the new loan has to include everything you already owe.
Take a home appraised at 100% of value with a first mortgage at 55% of value. Your equity is 45%. The 80% cap allows a new loan up to 80% of value, so 20% stays in the home. Room above your payoff is 25 points. That is 25 points of value, out of 45 points of equity, before anything else comes off.
Lenders ask you to keep a cushion because it protects both sides if prices dip. The federal consumer-finance regulator’s guide to using home equity says lenders typically want you to keep 10% to 20% equity after a cash-out refinance, a home equity loan, or a HELOC. The agency caps below are the binding limits.
Lendmire’s cash-out refinance programs work from this same math. A broker applies the cap to the appraised value, then subtracts everything that has to be paid off.
The Formula, Step by Step
Here is the one-line version:
Cash to you = (cap % × appraised value) − first-mortgage payoff − other liens paid off − financed closing costs.
In practice, a cash-out file moves in this order:
1. Pick the purpose. Cash-out, rate-and-term, or a government streamline. The purpose sets the cap.
2. Order the appraisal. The cap applies to the appraised value, not the value you hope for.
3. Confirm title and seasoning. Rules on how long you’ve owned the home and held the current loan apply.
4. Run credit, income, and ratios. The automated finding governs most files.
5. List every payoff. Your first mortgage and any other lien that must be cleared.
6. Subtract costs. Whatever you roll in reduces your net.
Across the wholesale programs Lendmire places files with, step five is where homeowners are most often surprised. A HELOC they forgot about, or a second lien that can’t stay in place, uses up room under the cap before any cash appears.
A Worked Example (Modeled Assumptions, Percentages Only)
These inputs are modeled assumptions, not market data. The home appraises at 100% of value, the one-unit primary-home cap is 80%, and the first mortgage is 55% of value. A second lien that must be paid off is 5%. Financed closing costs are about 2%.
| Step | Share of appraised value |
|---|---|
| Maximum new loan (80% cap) | 80% |
| Less first-mortgage payoff | −55% |
| Less second-lien payoff | −5% |
| Less financed closing costs | −2% |
| Net cash to you | 18% |
Remove the second lien and the net rises to 23%. Keep it, and 5 points of room are gone.
Now test the appraisal. Suppose the home appraises 5% lower than expected, so the value is 95% of the original figure. The cap falls to 76% of the original. Subtract the same 62 points of payoffs and costs, and net cash drops to 14%. A 5% miss in value cost you more than a fifth of your cash. This is why a low appraisal hurts cash-out files more than almost anything else.
Why the Cap Isn’t the Cash
Four things can put your number below the LTV math.
- The payoff stack. Everything that must be cleared comes off the top, as shown above.
- Financed costs. Closing costs can be paid out of pocket or built into the loan. Built in, they reduce your cash. The Loan Estimate shows what applies to your file.
- Credit and ratios. The wholesale conventional programs generally start at a 620 decision score, with a total ratio ceiling of 50% on most automated findings. Reserves can also apply on higher-ratio files.
- Appraisal and loan limits. A lower value shrinks the cap. A loan above the conforming limit moves into jumbo lanes with their own rules.
The cap is a ceiling, not a promise. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Limits by Program and Property Type
The same home can reach very different leverage depending on loan purpose and occupancy. The Fannie Mae Eligibility Matrix shows the conventional caps: 80% on a one-unit principal residence for cash-out, 75% on two to four units.
| Program / purpose | Typical ceiling |
|---|---|
| Conventional cash-out, 1 unit | 80% LTV |
| Conventional cash-out, 2–4 units | 75% LTV |
| Conventional rate-and-term, 1 unit | 95% LTV |
| FHA cash-out | 80% LTV/CLTV |
| VA cash-out | Higher; lender limits apply |
Three notes on that table.
FHA. HUD Mortgagee Letter 2019-11 cut the FHA cash-out cap from 85% to 80%. The cap counts combined debt, so any lien that stays in place uses up room. A second mortgage doesn’t get you past the cap.
VA. VA-backed cash-out can reach higher leverage than conventional or FHA, though lender limits often apply. You must live in the home you are refinancing, per the VA cash-out refinance page. VA measures LTV on the reasonable value shown on its Notice of Value. The funding fee counts toward the loan amount.
Multi-unit homes. Living in one unit of a two- to four-unit property is still a primary residence, but the cap is lower. Lendmire’s piece How Much a Cash-Out Refinance Releases on a 2-4 Unit Primary Home walks through that math.
A second home carries a lower cap than a primary home, and occupancy decides the leverage.
Reverse Math: Starting From the Cash You Want
Many homeowners know the dollar amount they need and want to know if their home can supply it. Work backward in percentages.
Say you want cash equal to 15% of the home’s value, and costs run about 2%. Take the 80% cap, subtract 15 and 2, and you get 63. Your total debt to be paid off has to sit at or below 63% of value. That means you need about 37% equity going in. You need more equity going in than you plan to take out.
If your debt is above that line, your options are to take less, wait while your balance falls, or consider other products. The cash-out caps pair with an appraisal you can’t control, so leave a margin.
Should You Take the Maximum?
You don’t have to borrow the full amount available. Borrowing less keeps a larger cushion and leaves more room if values slip.
A cash-out replaces your whole first mortgage. New terms apply to the whole balance, not just the new money. A larger balance raises your monthly obligation, and the terms on the whole loan may differ from what you have now. A home equity loan or HELOC, by contrast, leaves the first mortgage in place.
| Feature | Cash-out refinance | HELOC / home equity loan |
|---|---|---|
| First mortgage | Replaced | Stays in place |
| Terms apply to | Whole new balance | Only the new line or loan |
| Closing costs | Full refinance costs | Usually lighter |
| Best fit | Current loan is worth replacing | Current loan is worth keeping |
The CFPB’s research on cash-out refinances adds a caution. Rolling credit-card or other non-mortgage debt into your mortgage can put your home at risk if payments become unsustainable. Defaulting on a card is unlikely to cost you the house, but defaulting on a mortgage can. Cash-out also draws down wealth you might need later.
If the aim is cash for a project with a clear payoff, such as repairs, the case is simple. If the aim is to clear spending debt that could return, pause and weigh it.
Tax treatment can depend on your situation. Borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Where the General Rule Breaks
The 80% rule has named exceptions.
- A lane with no mortgage insurance. Lendmire’s wholesale partners include a lane reaching 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed. The home must be a primary residence with a conforming balance, and it carries its own six months of seasoning.
- Seasoning on the loan you’re replacing. On a conventional cash-out, the first mortgage being paid off has to be at least 12 months old, counted from note date to note date. At least one borrower must also have been on title for six months. Exceptions exist for delayed financing, inheritance, and legal awards.
- Recent cash purchases. If you bought with cash, delayed financing can let you pull cash out before the six months pass. The purchase has to be documented as an arm’s-length sale with no mortgage.
- Texas. A cash-out on a Texas homestead is capped by the state constitution. The 89.99% wholesale lane is not written there.
- Streamlines are not cash-out. The FHA Streamline (existing FHA loan, no appraisal, net tangible benefit) and the VA IRRRL (existing VA loan, net tangible benefit) cut costs on existing government loans. They don’t release equity.
- Rate-and-term. A rate-and-term (limited cash-out) refinance reaches 95% LTV on a one-unit primary home, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. It pays off your first mortgage, closing costs, and a purchase-money second lien. Only incidental cash comes back. Mortgage insurance applies above 80%. It can be removed on request at 80% of the original value with a good payment history and no subordinate liens, and the servicer must end it at 78%.
Credit events carry waiting periods set by the agencies: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Shorter periods may apply with documented extenuating circumstances.
Key Terms Defined
Appraised value: The value a licensed appraiser assigns to your home. Lenders apply the cap to this number, not to your estimate.
Equity: Appraised value minus everything you owe against the home.
Loan-to-value (LTV): The new loan divided by the appraised value. Combined LTV (CLTV) adds any other liens.
Payoff: The balance a lender must clear from the loan proceeds, such as your first mortgage or a lien that can’t stay.
Seasoning: How long you’ve owned the home or held the loan being replaced.
Limited cash-out (rate-and-term): A refinance that pays off the old loan and costs, with only incidental cash back.
Practical Checklist Before You Apply
- Pull your current mortgage balance and any HELOC or second lien balance.
- Estimate value conservatively, then run the formula at 5% lower.
- Check your ownership timeline against the six-month and 12-month tests.
- Decide the cash you need and whether a smaller amount keeps a better cushion.
- Compare the Loan Estimate line by line before you commit.
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
Can I borrow all of my equity?
No. Conventional and FHA programs cap the new loan at a percentage of value, which leaves part of your equity in the home. On a one-unit primary home that cap is 80%, so at least 20% of the value stays. A lender may require a larger cushion based on your file.
What if the appraisal comes in low?
Your cash shrinks fast. The cap applies to the appraised value, so a lower value lowers the maximum loan, while your payoffs stay the same. In the worked example, a 5% lower value cut net cash from 18% of value to 14%. Some borrowers take less cash or wait for a stronger appraisal.
Do closing costs reduce the cash I receive?
Closing costs can reduce your cash, depending on how they are paid. If you pay costs out of pocket, your cash is unchanged. If they are built into the loan, they count against the cap and reduce your net. Your Loan Estimate shows how each cost is handled on your file.
Can I use a cash-out to remove a second mortgage or HELOC?
Usually yes, and it is common. The new first mortgage pays off the old first mortgage and can also clear a second lien. That payoff counts against the cap, so it comes out of your available cash. On FHA, any lien that stays in place counts toward the combined limit.
Does a rate-and-term refinance let me take cash?
Only a small amount. A rate-and-term refinance pays off your current first mortgage and costs, with incidental cash back. It reaches higher leverage than cash-out, but it is built to restructure the loan, not release equity.
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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References
1. CFPB: Using Your Home Equity Guide
2. Fannie Mae Eligibility Matrix
3. HUD Mortgagee Letter 2019-11
5. CFPB’s research on cash-out refinances
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: How Much a Vacation Condo Cash-Out Refinance Releases · Condo Second Home Cash-Out Refinance vs Primary Home for the Same Cash · Cash-Out Refinance Reserve Rules for Second-Home Owners Pulling Equity
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.