The Quick Read: Usually about 20% on a home you live in. A conventional cash-out loan on a one-unit primary residence can reach 80% of the appraised value, so roughly 20% equity has to stay in the house after closing. The cash you receive is smaller than your paper equity. The new loan first pays off your old mortgage and any costs you roll in.
What Does “80%” Actually Mean?
The 80% figure caps the new loan, not the cash you walk away with. Lenders measure it as loan-to-value (LTV): the new loan amount divided by the appraised value of the home. Keep that ratio at or under the cap, and the loan fits the program.
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: 7.40% as of October 15, 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.
Here is the mechanic in plain steps:
1. The appraiser sets the value.
2. The lender multiplies that value by the program cap.
3. The result is the largest new loan allowed.
4. The new loan must pay off your current first mortgage, plus any closing costs you choose to roll in.
5. What remains is your cash.
Say your home appraises at 100 units of value and you owe 60. At an 80% cap, the new loan can be as large as 80. That leaves 20 units of room. Closing costs come out of that 20 before you see a dollar. Nobody mentions the costs in the first phone call. They matter.
That is why “I have 40% equity” does not mean “I can take 40% out.” Equity today is not the test. Equity left over after the loan is the test.
Equity Needed by Property Type
The cap drops as the property gets less like a primary home. Per the Fannie Mae Eligibility Matrix, a one-unit principal residence gets the highest conventional cash-out leverage. Two- to four-unit homes and second homes sit lower. Lendmire’s wholesale lenders follow the same pattern across the cash-out refinance programs the brokerage arranges.
| Property | Conventional cash-out cap | Equity that must remain |
|---|---|---|
| One-unit primary residence | 80% LTV | 20% |
| Two- to four-unit primary residence | 75% LTV | 25% |
| One-unit second home | 75% LTV | 25% |
A rental property lands at the same 75% cap. Occupancy decides the leverage.
Vacation homes deserve their own look. Lendmire’s piece How Much Equity a Vacation Home Cash-Out Refinance Releases at the Cap covers that case.
One wholesale lane goes higher. It reaches 89.99% LTV with no mortgage insurance, which leaves just over 10% equity behind. The conditions are tight. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
- A 680 credit score.
- A total debt ratio of 50% or less.
- A thirty-year fixed loan.
- A primary residence with a conforming loan balance.
- Its own six months of seasoning. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Everything here is subject to lender guidelines and full file review. It is not a commitment to lend.
Why You Need More Equity Going In Than You Leave Behind
You need more than 20% equity to get any cash at all. At exactly 20%, the new loan can only match what you owe today. Nothing is left over.
Think of it as two numbers. The first is the equity you hold now. The second is the equity the lender requires you to keep. Your cash lives in the gap between them, minus costs.
Run the numbers on a homeowner who owes 65% of the home’s value on a one-unit primary residence:
- The conventional cap is 80%.
- The gap is 15% of the home’s value.
- Closing costs rolled into the loan come out of that 15%.
- The remainder is the cash.
A homeowner who owes 78% has a gap of 2%. After costs, there may be nothing worth borrowing. Not worth it.
This is where many cash-out plans quietly die. Plenty of owners have the paper equity. Far fewer have enough room above the cap to make the loan worth its costs.
What Do FHA and VA Do Differently?
Government-backed cash-out loans follow their own caps, and both can differ from conventional. The FHA cap on a cash-out refinance sits near the conventional one-unit cap. Older articles quote a higher FHA figure that has since been retired, so check the date on anything you read.
VA is the outlier. VA allows far more leverage than conventional, and an eligible veteran may be able to borrow most or all of the home’s value. Two things pull that down. Costs rolled into the loan can lower the VA ceiling, and many lenders set a lower limit of their own. A VA cash-out also has to show a net tangible benefit, meaning the new loan has to leave the borrower better off in a measurable way.
Both are fully underwritten. Expect income, credit, assets and an appraisal.
Streamlines Are Not Cash-Out Loans
An FHA Streamline and a VA IRRRL both skip the equity question. They also skip the cash. Do not mix them up.
- FHA Streamline: refinances an existing FHA loan. It involves no appraisal, a limited credit review and a net tangible benefit. No cash comes back.
- VA IRRRL: refinances an existing VA loan. It carries a 0.5% funding fee unless you are exempt, no VA appraisal, a net tangible benefit and seasoning of the later of 210 days and six payments.
If you hold an FHA or VA loan and want cash, you need a different product. That means a fully underwritten cash-out loan. A streamline cannot get you there.
The Other Gates Besides Equity
Equity is one gate of several. A file with plenty of equity can still stall at another. In practice, the gate that blocks borrowers is often seasoning or debt ratio, not equity.
| Gate | What lenders look at |
|---|---|
| Credit | Wholesale conventional programs start at a 620 decision score |
| Debt ratio | Total ratio ceiling of 50% on most automated findings |
| Seasoning | First mortgage at least 12 months old; 6 months on title |
| Reserves | Extra cash in the bank when ratios run high |
| Appraisal | Sets the value every other number depends on |
Seasoning is the waiting period between events. For a conventional cash-out, the mortgage you are paying off must be at least 12 months old, counted note date to note date. A borrower must also have been on title for six months. The Fannie Mae Selling Guide lays out the six-month rule and its exceptions.
Those exceptions matter if you bought recently:
- Delayed financing: for buyers who paid cash for the home and want to pull money back out. It waives the title clock for an arm’s-length purchase. The cash-out cap still applies, and proceeds are tied to documented purchase costs.
- Inheritance and legal awards: a home acquired by inheritance, or awarded through divorce or separation, has no waiting period.
- Trusts: time held in a revocable trust can count when the borrower is its primary beneficiary.
Past credit events add their own waiting periods, set by the agencies rather than by any one lender. After a chapter 7 discharge the wait is four years. After a foreclosure it is seven. After a short sale or deed-in-lieu it is four. Documented extenuating circumstances can shorten these.
What If the Appraisal Comes in Low?
A low appraisal shrinks your cash, because the cap applies to the lower value. It hits harder than most owners expect.
Say you believe the home is worth 100 units and expect an 80% cap. That allows a loan of 80. The appraisal returns 95. Now the cap produces 76. The ceiling dropped by 4% of your original expected value, and your payoff did not change. All of that loss comes straight out of your cash.
If that happens, you have a few options:
- Take a smaller amount of cash.
- Ask the lender whether the appraisal can be reviewed with better comparable sales.
- Wait and reapply when value or your balance has moved.
- Drop the plan if the cash no longer covers the costs.
Expect this to bite hardest when you are already near the cap. A homeowner with a wide gap absorbs a low appraisal. A homeowner near the cap does not.
Special Cases
Existing second liens. Every lien that stays on the home counts toward the ceiling. A home equity loan or HELOC you keep adds to the total. Paying it off with the new loan reduces your cash by that amount. The Consumer Financial Protection Bureau notes that a cash-out refinance replaces your original mortgage, while a home equity loan or HELOC leaves the first lien in place.
Homes with no mortgage. A new loan on a free-and-clear home still counts as cash-out. The 12-month loan-age test has nothing to measure, but the equity cap and the other gates still apply.
Manufactured homes. These carry a much lower cash-out cap, and some are not eligible at all. Single-width homes are the usual problem. Fannie Mae’s Manufactured Housing Product Matrix sets the terms, and its cash-out wording is thin. Ask a loan officer to confirm before you plan around it.
Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. Lendmire’s higher-leverage wholesale lane is not written there.
Mortgage insurance. Insurance is required above 80% LTV. You can request cancellation at 80% of the original value with good payment history, no second liens and no decline in value. The servicer must end it at 78%. A standard conventional cash-out stops at 80%, so the insurance question usually does not come up.
Is the Cash Worth the Cost?
A cash-out refinance reprices your whole loan, not just the new cash. You swap your old balance, rate and term for a new package. That can be a fair trade if your old loan is no bargain. If it is not, think twice.
Weigh it honestly. The stronger play for a small cash need might be a HELOC or home equity loan, which leave your first mortgage alone. For a large need, or if your current terms are weak, a cash-out may fit better. It is a genuine toss-up that depends on your numbers.
The Consumer Financial Protection Bureau’s research on cash-out refinances and non-mortgage debt flags a real trade-off. Turning unsecured debt into mortgage debt can put your home at risk if payments become unsustainable. Missing a payment on a credit card is unlikely to cost you the house. Missing one on a mortgage can.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If You Don’t Have Enough Equity
You still have paths. Pick the one that matches why you want the cash.
- Wait. Your balance drops with each payment, and value may move. Neither is guaranteed, so do not plan around appreciation.
- Borrow less. A smaller cash amount may fit under the cap.
- Use a different product. A HELOC or home equity loan sits behind your first mortgage and may need less equity.
- Choose a rate-and-term refinance instead. This replaces your loan without taking cash. Leverage reaches 95% on a one-unit primary residence, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. Mortgage insurance applies above 80%.
Here is a quick self-check:
1. Estimate your home’s value. Be conservative.
2. Add up every loan against the home.
3. Divide the total by your value. That is your current LTV.
4. Subtract it from the maximum LTV your lender allows, which is typically lower if the home is a second home or has two to four units.
5. Multiply the gap by your value. Then subtract expected closing costs.
If the result is thin, the loan probably does not make sense yet. If it is wide, you have room to work with.
Key Terms Defined
Home equity: the part of your home’s value you own, meaning value minus every loan against it.
Loan-to-value (LTV): the loan amount divided by the home’s appraised value.
Seasoning: the waiting period a lender requires before you can refinance, such as time on title or the age of your current loan.
Delayed financing: a conventional exception that lets a cash buyer take money out without waiting out the full title period.
Net tangible benefit: a test on VA and FHA streamlines that asks whether the new loan leaves you better off in a measurable way.
Appraised value: the value an appraiser assigns to your home, which sets the ceiling on the new loan.
Where to Go From Here
Start with your numbers: value, balance, and every other lien. Then decide what the cash is for and what it will cost you to get it. 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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use all of my equity in a cash-out refinance?
No. A conventional loan on your primary home leaves about 20% equity in the house. Your payoff and closing costs also come out of the loan before you get any cash. The most you can take is the gap between your current balance and the cap, minus costs.
Does the equity requirement change by lender?
Yes, sometimes. Agencies and programs set the ceiling, and individual lenders can add their own limits. This is common on VA loans, where some lenders cap leverage below what VA allows. Lendmire is a broker, so it can compare programs across the wholesale lenders it works with.
Can I do a cash-out refinance right after buying my home?
Usually not right away. A conventional cash-out generally needs a borrower on title for six months, and the mortgage being paid off must be at least 12 months old. Delayed financing, inheritance and legal awards are named exceptions. Each has its own conditions, so confirm yours with a loan officer.
Is a cash-out the same as a streamline refinance?
No. FHA Streamline and VA IRRRL loans refinance an existing government loan and give no cash back. They skip the equity test for that reason. If you have an FHA or VA loan and want cash, you need a fully underwritten cash-out product instead.
What if I’m just short of the equity I need?
You can borrow less, wait for your balance to drop, or look at a HELOC or home equity loan. A rate-and-term refinance is also an option if your goal is a different loan rather than cash. A smaller cash request often fits where a larger one does not.
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.
For your own numbers, request a scenario review with Lendmire.
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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 Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
3. CFPB Office of Research Blog: A Look at Cash-Out Refinance Mortgages and Their Borrowers
4. Fannie Mae Manufactured Housing Product Matrix
5. CFPB: Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
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 Much Cash a Cash-Out Refinance Releases After Your Payoff · How Much Cash to Take on a Cash-Out Refinance to Clear Card Debt · How Much Equity You Must Keep After a Cash-Out Refinance?
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.