The Quick Read: On a standard conventional cash-out refinance of a one-unit home you live in, you keep at least 20% equity. That means the new loan is at most 80% of the appraised value. Mortgage insurance starts above 80% on the agency path (one wholesale no-mortgage-insurance lane reaches higher and is covered below), so a loan at or under the cap normally carries none. Two- to four-unit primary residences, second homes and investment property are capped lower, at 75%.
Key Takeaways
- The 80% cap and the mortgage insurance line are the same line on a standard cash-out. Staying at or under it keeps the insurance off.
- The 80% applies to every loan against the home, not just the new first mortgage. A HELOC or second lien that stays in place counts.
- The appraisal sets the number. A lower value shrinks your cash and can push a file over the line.
- Costs rolled into the loan use up room under the cap. They come out of your cash, not out of thin air.
- Two seasoning clocks apply: the age of your current loan and your time on title.
- Texas homestead cash-outs have their own 80% cap, set by the state constitution.
What a Cash-Out Refinance Does to Your Equity
A cash-out refinance swaps your current mortgage for a bigger one and hands you the difference. Your equity shrinks by the cash you take, so the equity you keep is what remains after the new loan sits on the home.
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.
Equity is the home’s value minus everything owed against it. Loan-to-value (LTV) is the same idea flipped: the loan balance divided by the value. Keep 20% equity and your LTV is 80%. They are two ways of describing one number.
Here is the formula in plain words:
1. Take the appraised value.
2. Multiply it by 80% (on a one-unit primary residence). That is your maximum new loan.
3. Subtract the payoff of your current loan, any other lien that stays, and the costs you finance.
4. What is left is your cash.
You don’t have to remember the 80% as “80% of my equity.” That is the most common mix-up. The 80% applies to the total loan against the full appraised value, not to the equity you’ve built.
Lendmire’s cash-out refinance programs page lays out the leverage by occupancy. The short version: occupancy sets the cap. Primary residences get the most room.
Why 80% Is Also the PMI Line
Private mortgage insurance (PMI) protects the lender on loans that start above 80% of the home’s value. On a standard conventional cash-out, you stay at or under 80%, so no insurance is required.
PMI is a monthly charge added when you borrow more than 80% of the home’s value. It covers the investor if you stop paying. You pay for it; it does not protect you. Typical annual premiums run from 0.58% to 1.86% of the balance, depending on the file.
The 80% line comes from how Fannie Mae and Freddie Mac buy loans. Their charters call for added protection when the balance is above 80% of value. The Federal Housing Finance Agency explains that this credit enhancement is most often mortgage insurance. Fannie Mae’s mortgage insurance coverage table starts at the 80.01–85% band. Nothing at or below 80% needs coverage.
Where does that leave a cash-out? The standard conventional cash-out on a one-unit primary residence already stops at 80%. So you aren’t choosing between “more cash” and “no PMI” on the standard path. The cap itself keeps PMI away.
One exception exists. Across the wholesale programs Lendmire places files with, one lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score and a 50% ratio on a thirty-year fixed loan. The home must be your primary residence with a conforming balance. The lane has its own six-month seasoning rule and is not written in Texas. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The Worked Example: Equity Kept at Different Starting Balances
Your room for cash equals the 80% cap minus what you already owe. The lower your current balance, the more cash fits under the line.
Skip the dollars. Treat the home’s appraised value as 100% and look at what you owe as a share of it. The table shows a one-unit primary residence on the standard agency path.
| Current balance (% of value) | Room under the 80% cap | Equity kept at the cap | PMI on the new loan? |
|---|---|---|---|
| 40% | 40 points | 20% | No |
| 55% | 25 points | 20% | No |
| 70% | 10 points | 20% | No |
| 78% | 2 points | 20% | No |
| 85% | None | n/a | Not a standard cash-out |
“Room” is before costs. If you finance closing costs, they come out of that room first. A file at 78% with 2 points of room may find the costs eat all of it, which leaves no cash at all.
The last row matters. A homeowner already above 80% can’t take cash out on standard terms. That borrower may look at a rate-and-term refinance instead, covered below.
The Appraisal Buffer: Plan for a Lower Number
A full appraisal sets the value, and the value sets the cap. If the appraisal comes in below what you expected, your cash shrinks, and the file can cross 80%.
Run it as percentages of your expected value. Say you expect the home to appraise at 100% and you owe 60%. At the 80% cap, your room is 20 points. Now say the appraisal lands 5% low, at 95. The cap becomes 76, and your room drops to 16 points. A 5% miss costs you four points of cash.
Closing costs financed into the loan take another bite. Keep a cushion between the loan you want and the cap. Aiming for about 77% to 78% is one way to build that room, and anything below that is a bonus. That cushion is a planning habit, not a program rule.
Don’t lean on an online estimate. A Zestimate is a guess. The appraiser’s number is the denominator in your LTV, and it is the only one that counts.
Every Lien Counts: The HELOC Trap
The cap applies to the combined balance of all loans against the home, not just the new first mortgage.
Freddie Mac’s Seller/Servicer Guide §4203.1 sets the 80% maximum for a one-unit primary residence cash-out. It tests the first loan and the total of all liens, including a HELOC. Fannie Mae’s matrix shows the same pairing of LTV and combined LTV.
Say you have a first mortgage and a HELOC that you plan to keep. Both balances count toward the 80% line. If you want the most cash, you pay off the second lien with the new loan. That makes the new loan bigger, and it still has to fit under the cap.
The same Guide section says the ratio is rounded up to the next whole number. Its own example turns 94.01% into 95%. On a cash-out, a file just over 80% can be treated as the next whole number up. Barely over still counts as over.
What the Lender Checks Beyond Equity
Equity is the first gate. After that, the file has to clear seasoning, credit, ratios and reserves.
- Age of your current loan. The first mortgage being paid off must be at least 12 months old, counted note date to note date.
- Time on title. At least one borrower must have been on title for six months before the loan funds. Fannie Mae’s cash-out refinance rules in B2-1.3-03 set both clocks.
- Credit. The wholesale conventional programs start at a 620 decision score. Individual lenders can set higher floors.
- Ratios. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%.
- Reserves. On Fannie Mae automated files with a ratio over 45%, six months of reserves are required (same B2-1.3-03 section).
- Pricing. Cash-out carries a pricing adjustment that a rate-and-term refinance doesn’t. Your Loan Estimate shows the full terms.
The two seasoning clocks run separately. You can pass one and fail the other. A borrower with a three-year-old home and a loan refinanced eight months ago will usually wait on the note age.
Every figure here is subject to lender guidelines and full file review. None is a commitment to lend.
Where the 80% Rule Bends or Breaks
The 80% cap fits one-unit primary residences. Other property types, loan types and situations change the answer.
Other occupancy types. A cash-out can be written on a primary residence, a second home or an investment property. Occupancy sets the leverage. The cap is 80% on a one-unit primary residence and 75% on two- to four-unit primary residences, second homes and investment property. This article stays with the home you live in.
Free-and-clear homes. A new loan on a home with no mortgage still counts as a cash-out. The 80% cap still applies.
Delayed financing. A cash buyer can take cash out inside the six-month title window. The amount is limited to the documented purchase investment plus costs. The loan must still fit the cash-out LTV cap based on the current appraised value.
Other title exceptions. Inheritance and legal awards can waive the six-month title wait. Check the details with your loan officer, because the paperwork is specific.
Manufactured homes. The Fannie Mae Eligibility Matrix limits single-width manufactured homes to purchase and limited cash-out refinances. No full cash-out.
Texas homestead. A Texas cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution. That figure comes from the state, not the agencies. The no-mortgage-insurance wholesale lane is not written there.
Government loans. FHA and VA have their own insurance and fee structures. The Homeowners Protection Act cancellation rights discussed below do not apply to FHA or VA insurance.
Limited Cash-Out: A Different Product
A rate-and-term refinance, called a limited cash-out, reaches much higher leverage. It allows 95% LTV on a one-unit primary residence, and 97% where the existing loan is agency-owned and the first-time-buyer program allows. The new loan pays off your first mortgage, the closing costs and a purchase-money second lien. Cash back is capped at an incidental amount, and each agency sets its own limit. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000. Freddie Mac allows the greater of 1% of the new loan amount or $2,000. Mortgage insurance applies above 80% on the agency path, with the wholesale no-mortgage-insurance cash-out lane as the one exception. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
So if your goal is a lower balance on better terms, not cash, a limited cash-out may fit when you’re above 80%. But it won’t pay you meaningful cash.
If You Have PMI Now and Want Cash
Old PMI doesn’t block a cash-out. It ends when the new loan pays off the old one, and the new loan is tested on its own LTV.
If your new loan lands at or under 80%, the new file generally carries no PMI. That makes a cash-out a possible exit from existing PMI, if the numbers fit.
Without refinancing, the Homeowners Protection Act gives you two exits. The Consumer Financial Protection Bureau explains the difference:
| Rule | At 80% | At 78% |
|---|---|---|
| What happens | You may request cancellation | Servicer must end it automatically |
| Measured against | Original value | Original value (scheduled balance) |
| Conditions | Good payment history, no junior liens, no drop in value | Payments current |
Note the catch. Cancellation at 80% isn’t automatic. You ask for it. The servicer may want proof that value has not fallen below the original, often through an appraisal. A second lien blocks the request.
Decision Table: Which Move Fits Your Situation
Match your starting point to the move. The right answer depends on your balance, your goal and how fast the insurance would otherwise fall away.
| Your situation | Likely move |
|---|---|
| Owe well under 80%, want cash, no PMI today | Cash-out at or under 80% |
| Have PMI, balance near 80% of original value | Request cancellation; skip a refinance |
| Have PMI, balance high, need cash | Cash-out to a new loan at or under 80% (if the appraisal supports it) |
| Want cash but owe more than 80% | Limited cash-out, or keep the loan and revisit later |
| Have FHA insurance | Compare options with a loan officer; HPA rights don’t apply |
| Want more than 80% with no insurance | Ask about the wholesale no-MI lane, if you fit its file requirements |
A fair thought on the middle rows: when the PMI would end soon anyway, refinancing just to remove it rarely makes sense. If you’re a year or more from the 78% mark, the math tilts the other way.
Should You Take Maximum Cash?
Taking every dollar the cap allows is a choice, not a goal. A cushion below 80% protects you from appraisal misses and keeps your monthly budget from stretching.
Think in three tradeoffs.
First, maximum cash leaves exactly 20% equity. A dip in home values could erase that cushion. Second, a bigger loan means a bigger monthly obligation. Third, nothing forces you to take the full amount. Borrowing 70% of value instead of 80% leaves a thicker equity buffer and a smaller obligation.
Ask what the cash is for. Paying off higher-cost debt or funding a repair can justify it. Funding a lifestyle on equity is harder to defend. Borrowing cash you don’t need yet for a planned purchase is the weakest case.
If you’re close to the line, consider a smaller cash-out and a HELOC for the rest later. Remember the HELOC counts toward the cap if it exists at closing.
Key Terms Defined
Equity: The home’s appraised value minus every loan against it.
Loan-to-value (LTV): Your loan balance divided by the home’s value, shown as a percentage.
Combined LTV: The same ratio, but counting every lien against the home, including a HELOC.
Seasoning: A required waiting period, such as the age of your current loan or your time on title.
Limited cash-out refinance: A refinance that pays off your loan and costs, with only a small amount of cash back.
Private mortgage insurance (PMI): A monthly charge you pay on loans above 80% of value. It protects the investor, not you.
Frequently Asked Questions
How much equity do I need to keep on a cash-out refinance to avoid PMI?
At least 20% on a one-unit primary residence, which means a new loan at or under 80% of the appraised value. Two- to four-unit primary residences, second homes and investment property are capped at 75%, so they require 25% retained equity. One wholesale lane reaches 89.99% LTV without mortgage insurance for primary residences with a 680 score, a 50% ratio and a thirty-year fixed loan. Eligibility depends on lender guidelines and full file review.
Does a HELOC count toward the 80% limit?
Yes. A HELOC or any second lien that stays in place counts toward the combined limit. If you keep it, the new first mortgage has less room. Paying it off with the new loan can free room, but then the larger loan still has to fit the cap.
Can I do a cash-out if I already have PMI?
Yes. The old PMI policy ends when the new loan pays off the old one. The new loan is tested on its own LTV. At or under 80%, the standard path adds no new PMI.
Does PMI fall off automatically at 80%?
No. At 80% of the original value you can request cancellation, if you meet the conditions. Automatic termination happens at 78%. Both are measured against original value unless the servicer allows a new valuation under investor rules.
What if my appraisal comes in low?
Your maximum loan drops with it. A 5% shortfall on the appraisal cuts your cap by 5% of that value, which can erase most or all of your cash. Plan for a cushion so a small miss doesn’t sink the deal. If the value is far off, you may need to reduce the cash amount or wait.
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.
The takeaway: the equity you keep is set by the appraisal and the cap, so protect it with a buffer before you ask for the full amount.
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.
For the program’s current guidelines, see conventional loan programs.
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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. FHFA: Private Mortgage Insurer Eligibility Requirements
2. Fannie Mae Selling Guide B7-1-02
3. Freddie Mac Seller/Servicer Guide §4203.1
4. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
5. Fannie Mae Eligibility Matrix
6. Consumer Financial Protection Bureau
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 Reserves Are Verified on a Conventional Cash-Out Refinance? · Cash-Out Refinance Requirements When You Want PMI to Go Away · Best Cash-Out Refinance Program Without PMI on a Conventional Loan
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.