The Quick Read: A cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference in cash. On a one-unit primary home, the new loan can reach 80% of the appraised value, and 75% on a two- to four-unit home. You also need six months on title and a first mortgage that is at least 12 months old, with limited exceptions. These are agency baselines, and every figure is subject to lender guidelines and full file review.
Key Takeaways
- The 80% ceiling counts every lien on the home, so you keep at least 20% equity.
- Two clocks apply: six months on title, and a 12-month-old loan being paid off.
- Credit score, debt-to-income ratio, reserves, and appraised value decide how much cash is possible.
- A cash-out loan is priced higher than a plain rate-and-term refinance. That cost shows up in the rate or points, not as a separate line.
- Lendmire’s piece Vacation Home Cash-Out Refinance vs Primary Home for a Second-Home Owner covers the occupancy difference if you own a second home.
What Is a Fannie Mae Cash-Out Refinance?
It is a new first mortgage on the home you already own. The new loan pays off your existing mortgage liens, then you keep the leftover equity. Fannie Mae’s Selling Guide treats it as a refinance with no restriction on how you use the proceeds.
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: 7.32% as of October 22, 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.
Fannie Mae does not lend to you directly. It sets the rules, and lenders sell qualifying loans to it. Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders. The lender reviews your file and makes the decision.
Our cash-out refinance programs page covers the loan options we place. Here the focus is how the agency rules work.
Cash-out differs from a home equity loan or HELOC. Those leave your first mortgage in place and add a second loan on top. A cash-out refinance replaces the first mortgage entirely.
How Is the Loan Underwritten, Step by Step?
Six things decide the outcome: appraised value against your existing liens, the two seasoning clocks, your debt-to-income ratio, credit score, reserves, and pricing. Here is the order they usually come up.
Step 1: Size the equity. The new loan must pay off the first mortgage and any second liens. It can also cover financed closing costs and prepaids. The total cannot pass the LTV ceiling applied to the appraised value. Cash to you is whatever remains.
Step 2: Check the clocks. The lender confirms how long you have been on title and how old the loan being paid off is. More on this below.
Step 3: Run the underwriting. Most files go through Fannie Mae’s automated system, called Desktop Underwriter. Its finding governs the file. On cash-out loans, the maximum ratio it allows may be lower than on other loans. Across the wholesale conventional programs we place, files generally start at a 620 decision score, with a 50% total ratio ceiling on automated findings. Manually underwritten loans cap at 36%, or 45% with the reserve and score factors in the Fannie Mae Eligibility Matrix.
Debt-to-income, or DTI, is your total monthly obligations divided by your gross monthly income. The new mortgage payment is part of that math, as Fannie Mae’s DTI rules explain.
Step 4: Confirm reserves. Reserves are money you still hold after closing. On automated files with a DTI above 45%, six months of reserves are required. Keep your cash-out proceeds out of that count unless the lender confirms otherwise.
Step 5: Appraisal. A cash-out refinance needs a new appraisal. Value is the denominator in the LTV math, so a lower number directly shrinks your cash.
Step 6: Pricing. Fannie Mae adds a loan-level price adjustment, or LLPA, to cash-out loans. It rises with higher LTV and lower credit scores. Lenders usually pass it through in the rate or points. You will not see it as its own fee.
Why Do the Two Seasoning Clocks Matter?
You can have plenty of equity and still fail on timing. Seasoning is the waiting period a lender wants before you can cash out. Two separate clocks run at once.
The title clock. At least one borrower must have been on title for six months before the new loan funds.
The loan-age clock. The mortgage being paid off must be at least 12 months old, measured from its note date to the new note date. Fannie Mae added this in Announcement SEL-2023-01.
Picture a homeowner who bought 18 months ago with a mortgage. Both clocks are met. Now picture someone who bought eight months ago. The title clock is met, but the loan is too young. A cash-out loan is off the table for now.
Wholesale lanes can add their own seasoning on top of the agency rules. One lane we place reaches 89.99% LTV with no mortgage insurance, but it carries its own six-month seasoning. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Where Does the General Rule Break?
The agency rules have named exceptions. Know them before you assume you are stuck.
Delayed financing. If you paid cash and bought within the past six months, you may still cash out. The original purchase must be arm’s-length, and the lender must document it. The Selling Guide page lists the full conditions. An older archived version of the guide also names eligible buyer entities, so confirm the current wording with your loan officer.
Inheritance or legal award. No waiting period applies if the lender documents that you inherited the home. The same goes for a home awarded to you in a divorce, separation, or dissolution of a domestic partnership.
LLC ownership. Time held by an LLC you majority-own or control can count toward the six months. Title must move to you as an individual to close.
Listed for sale. A home that was listed must be off the market on or before the funding date.
Delinquent property taxes. Taxes can sometimes be financed into the new loan, and an escrow account may be required. The guide’s wording here is detailed, so treat this as a conversation with your loan officer rather than a rule of thumb.
Features that can block eligibility. Based on an older guide version, a temporary rate buydown, some PACE obligations, and paying off an installment land contract with proceeds can stop a cash-out. Verify against the current guide.
Student loan payoff. When proceeds pay off eligible student loans, the cash-out LLPA is waived. The standard LTV limits still apply.
Manufactured homes. Single-width manufactured homes are not eligible for cash-out on a primary residence.
State rules. Some states, Texas among them, have special rules for cash-out loans on a homestead. In Texas, the state constitution caps the loan at the agency figure, and the wholesale lane above is not written there.
How Does Equity Math Work?
Let’s walk the logic without dollar amounts. Say your home appraises at some value and you are on a one-unit primary residence.
1. Multiply the appraised value by 80%. That is your maximum total debt against the home.
2. Subtract your current first mortgage balance and any second liens.
3. Subtract financed closing costs and prepaids.
4. What remains is your potential cash.
On a two- to four-unit primary home, step 1 uses 75%. A second home and an investment property also use 75%, so occupancy decides your leverage.
Compare this with a rate-and-term refinance, also called limited cash-out. It pays off the existing first mortgage and closing costs with only incidental cash back. That route reaches 95% LTV on a one-unit primary residence, and 97% in specific cases. The jump from 80% to 95% explains why lenders treat cash-out as the riskier loan. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
| Factor | Cash-Out | Rate-and-Term |
|---|---|---|
| Max LTV, one-unit primary | 80% | 95% |
| Max LTV, 2-4 unit primary | 75% | Varies by program |
| Cash back to you | Any amount | Incidental only |
| Seasoning rules | Yes | Fewer |
| Pricing adjustments | Higher | Lower |
Mortgage insurance matters at the upper end. It is required above 80% LTV, so a cash-out loan at the 80% ceiling generally avoids it. Confirm that on your own file.
What Does the Borrower Decision Look Like?
Start with the purpose. Paying off higher-cost debt or funding repairs are the most common uses in the CFPB’s research on cash-out borrowers. The same research cautions that paying non-mortgage debts with mortgage debt can raise foreclosure risk.
Then weigh the real tradeoffs:
- Monthly budget. A larger balance usually means a larger payment, and that raises your DTI.
- Your current loan. If your existing first mortgage has favorable terms, a HELOC or home equity loan may keep it intact. Those products carry their own combined-LTV limits.
- Closing costs. Costs can be financed inside the LTV limit, but financing them uses up cash you could have taken.
- Equity cushion. You walk away with at least 20% equity, and the new debt resets your balance.
If you may want to stay in a similar balance range, a rate-and-term refinance is a cleaner path. If you need a large lump sum and have a long ownership history, cash-out fits.
One practitioner note. Across the wholesale programs we place files with, the most common surprise is not credit. It is the appraisal coming in lower than expected, which cuts proceeds even when the borrower qualifies. Plan for a range, not a single number.
What Mistakes Cause Problems?
- Assuming you can cash out right after buying. The title and loan-age clocks both apply.
- Borrowing to the ceiling. The 80% cap counts every lien, including a second mortgage or HELOC.
- Expecting a line-item fee. The pricing cost sits in your rate or points.
- Ignoring lender overlays. A lender can set rules stricter than the agency baseline, so quotes differ.
- Forgetting the right to cancel. On a refinance of the home you live in, you generally have three business days to rescind, and funds typically wait until that window ends. Regulation Z sets this rule. You can waive it only for a bona fide personal financial emergency.
Key Terms Defined
LTV (loan-to-value): Your total mortgage debt divided by the home’s appraised value.
Seasoning: The waiting period a lender wants before you can refinance or cash out.
DTI (debt-to-income): Your monthly debt payments divided by your gross monthly income.
LLPA (loan-level price adjustment): A pricing add-on tied to loan features such as LTV and credit score.
Reserves: Savings you still hold after closing, usually counted in months of payments.
Delayed financing: An exception that lets a recent cash buyer take cash out within six months of purchase.
Frequently Asked Questions
How much equity do I have to keep in a cash-out refinance?
At least 20% on a one-unit primary home, because the ceiling is 80% LTV. On a two- to four-unit primary home, you keep at least 25%. Every lien counts toward that limit, including a second mortgage or HELOC. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Can I cash out right after I buy my home?
Usually not. You need six months on title, and the loan being paid off must be at least 12 months old. Delayed financing, inheritance, and legal awards are the exceptions.
Do I need mortgage insurance on a cash-out refinance?
Mortgage insurance is required above 80% LTV. A cash-out at the 80% ceiling generally would not carry it, but your lender confirms this. Insurance on your old loan ends when that loan is paid off.
Is a cash-out refinance priced differently from a regular refinance?
Yes. Fannie Mae applies an LLPA to cash-out loans that grows with higher LTV and lower credit scores. It raises cost through the rate or points. It does not appear as a separate fee.
Can I cancel after I sign?
On a refinance of the home you live in, you have a three-business-day right to cancel. If required notices or disclosures were not delivered, the right can last up to three years. Confirm details on your own paperwork.
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 rules change often, so confirm current terms before you decide, and note that nothing here is a commitment to lend.
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. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B3-6-02: Debt-to-Income Ratios
4. Fannie Mae Announcement SEL-2023-01
6. CFPB: Regulation Z § 1026.23, Right of rescission
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 a Second Home Conventional Refinance Can Finance · How to Refinance a Conventional Loan on a Condo · Can a Conventional Cash-Out Refinance Close Without an Appraisal?
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.