The Quick Read: Fannie Mae caps a conventional cash-out refinance at 80% loan-to-value on a one-unit home you live in. That cap drops to 75% on two- to four-unit principal residences, second homes and investment property. Occupancy decides the ceiling, and the appraisal decides how much room you actually have. Everything here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Key Takeaways
- Loan-to-value (LTV) is the new loan divided by the appraised value. Cash-out caps it at 80% on a one-unit primary home.
- Rental or second-home status lowers the cap to 75%, per the figures across the wholesale programs we place files with.
- Cash-out needs a first mortgage at least 12 months old and a borrower on title for 6 months, with named exceptions.
- A “limited” refinance, with only incidental cash back, gets far higher leverage than a true cash-out.
What Counts as a Cash-Out Refinance?
A cash-out refinance replaces your current mortgage with a bigger one and pays you the difference. Under the Fannie Mae Selling Guide, it pays off the existing mortgage with a new first mortgage on the same property. It can also be a new loan on a home you own free and clear. Financing closing costs, points and prepaids is an acceptable use. Lendmire’s cash-out refinance programs follow these same agency rules.
The line between cash-out and a limited cash-out refinance matters more than most people expect. A limited (rate-and-term) refinance pays off the old first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. On a one-unit principal residence, that lane reaches 95% LTV. Take real cash and the cap falls to 80%. Same house, same borrower, a fifteen-point swing. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Many borrowers assume “cash-out” is about intent. It’s about how much money leaves the closing table.
The LTV Caps, Side by Side
Here is how the cash-out ceilings line up by occupancy. Fannie Mae publishes the official limits in its Eligibility Matrix, and they get revised from time to time.
| Property and use | Cash-out max LTV |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
| Investment property (any unit count) | 75% |
If the title brought you here asking about a rental, the answer fits in one sentence: occupancy sets the leverage, and a non-owner-occupied property sits in the 75% row. This article stays focused on the home you live in.
Compare that with purchase leverage on a primary residence, where the program reaches 95%, or 97% for a first-time buyer on a fixed rate. Cash-out is the most conservative lane. Lenders see a borrower pulling equity out as higher risk than one buying with a down payment.
How the Loan Gets Underwritten, Step by Step
Step 1: Classify the loan. The lender totals what comes back to you. Payoffs and closing costs are fine. Cash beyond the incidental amount makes it a cash-out.
Step 2: Check seasoning. Seasoning is the waiting period before you can refinance. The first mortgage being paid off must be at least 12 months old, counted from the old note date to the new one. At least one borrower must also have been on title for six months.
Step 3: Confirm the home isn’t for sale. If the property was listed, it has to come off the market on or before the new loan funds.
Step 4: Order the appraisal. LTV is the loan amount divided by appraised value. The appraisal is the lever you don’t control. A lower value shrinks your usable equity dollar for dollar.
Step 5: Run the automated findings. Across the wholesale conventional programs we place files with, the floor is a 620 decision score, and the total debt-to-income ceiling on an automated approval is 50%. Under Fannie Mae’s rules, a ratio above 45% on a cash-out triggers six months of reserves. Reserves are money left in the bank after closing.
Step 6: Price the loan. Fannie Mae adds a loan-level price adjustment to cash-out loans. The archived Selling Guide topic explains that it varies by LTV and credit score. In plain terms, the cost rises as leverage rises and credit falls. Your Loan Estimate shows how it lands on your file.
Worked Example: Reading Your Own Equity
Run the numbers on a one-unit primary home. Say you assume an appraisal and a payoff balance of your own. Multiply the appraised value by 80%. That is the largest new loan the cash-out lane allows. Subtract your current payoff, then the costs you finance. What remains is your cash.
Now see what a weak appraisal does. If the home appraises 5% lower than you expected, the 80% ceiling drops with it. The cash you’d net shrinks by far more than 5%, because the payoff stays fixed. A small value miss takes a big bite out of proceeds.
The same math at 75% shows why a two- to four-unit home or second home yields less. Each five-point drop in the cap removes five percent of value from your potential cash.
Mortgage insurance also matters here. Mortgage insurance is a monthly cost lenders require when you borrow above 80% LTV. At the 80% cash-out cap, you sit right at the line. One wholesale lane we use reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed, primary residence, conforming balance, with its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution, and that lane isn’t written there. Every figure here varies by lender and program, and guidelines, property type, leverage, and credit profile all apply.
Where the Rule Bends
The general rules have named exceptions. These come up often.
Delayed financing. Paid cash for the home within the past six months? You can still do a cash-out refinance. The original purchase must be arm’s-length, and a settlement statement must show no mortgage financing. Fannie Mae’s archived guidance also allows a purchase made through a trust or an entity the borrower wholly owns.
Inheritance or a legal award. Divorce, separation and inheritance have been treated as exceptions to the title-time rule. Confirm the current Guide wording on your file.
Co-owner buyout. The 12-month first-mortgage rule is waived when you buy out a co-owner under a legal agreement. This is a common route after a divorce or when siblings split a parent’s home.
Listed for sale. Older matrices capped LTV lower for homes recently listed. The current Guide only requires the listing be withdrawn by funding.
Manufactured homes. Cash-out is allowed only at a sharply lower cap. Treat this as a lender-by-lender question.
Transactions that don’t qualify. Loans with a temporary interest rate buydown are ineligible. So are certain PACE-loan situations where you have the equity to pay the PACE loan off but choose not to. Fannie Mae also prohibits structuring around its cash-out policy, such as prearranged refinancing agreements meant to dodge the rules.
Student loan cash-out. The cash-out price adjustment can be waived when specific delivery requirements are met. Ask whether your file fits.
ARM or Fixed: Does It Change the Cap?
On cash-out, the current matrix lists the same figure for fixed and adjustable rates. Older consumer articles claim adjustable loans carry a cap ten points lower. That was true of older matrices, and it is outdated. The limited refinance lane is a separate product: 95% on a one-unit principal residence, rising to 97% where the existing loan is agency-owned and the first-time-buyer program allows.
What Cash-Out Does to Your Budget and Credit
A bigger loan usually means a bigger monthly payment, and the new terms replace your old ones. The Consumer Financial Protection Bureau says in its guide to using home equity that a cash-out may also lengthen your payoff timeline. It adds that lenders typically want you to keep 10% to 20% of your home value as equity.
There’s a risk worth naming plainly. Rolling credit card or other unsecured debt into your mortgage puts your home behind that debt. Unpaid cards rarely cost you the house. An unpaid mortgage can.
On credit, a CFPB review of borrowers over several years found scores often jumped after a cash-out, then drifted down, while generally staying above where they started. Many borrowers paid down card and auto debt with the cash. That is a pattern, not a promise for your file.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Loan-to-value (LTV): The new loan amount divided by the home’s appraised value.
Combined LTV (CLTV): All loans secured by the home, added together, divided by value.
Cash-out refinance: A new first mortgage that pays off the old one and returns extra cash to you.
Limited cash-out refinance: A refinance that pays off the old loan and costs with only incidental cash back.
Seasoning: The required waiting time on a loan or on title before you can refinance.
Loan-level price adjustment: A pricing add-on Fannie Mae applies based on factors such as LTV and credit score.
Reserves: Money you still hold after closing, which some files must show.
If You’re Over the Cap
Say you hold 85% LTV and want cash. You have options, and none involve gaming the appraisal. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
1. Wait or pay down. Appreciation and principal payments both lower your ratio over time.
2. Switch to a limited refinance. If you mainly want a lower-balance restructure, the 95% lane takes only incidental cash back.
3. Take less cash. Cutting the amount you pull out pulls the new loan under the cap.
4. Consider a different structure. A second lien or home equity line leaves your first mortgage alone. Compare the full costs.
5. Look at the no-mortgage-insurance lane. If your file fits its score, ratio and occupancy conditions, it reaches further than the standard cash-out cap.
A decision table helps weigh the first mortgage you have against a new one.
| Question | Keep current loan | Cash-out refinance |
|---|---|---|
| New loan terms | Unchanged | Replace the old terms |
| Balance | Keeps falling | Rises to fund cash |
| Appraisal needed | No | Yes |
| Seasoning rules | None | 12-month, 6-month title |
Frequently Asked Questions
What is the maximum LTV on a Fannie Mae cash-out refinance?
It is 80% on a one-unit principal residence. Two- to four-unit principal residences, second homes and investment property sit at 75%. These caps come from Fannie Mae’s Eligibility Matrix, and individual lenders may set tighter overlays. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
Can I cash out right after buying my home?
Usually not. Most borrowers need six months on title, plus a first mortgage at least 12 months old if one is being paid off. The delayed financing exception covers a documented cash purchase, so a buyer who paid cash can often refinance sooner.
Does cash-out refinancing require mortgage insurance?
Only above 80% LTV. At 80%, you generally don’t need it. You can request cancellation at 80% of original value with good payment history, and servicers must end it automatically at 78%.
How does credit score affect a cash-out?
Wholesale conventional programs start at a 620 decision score, and pricing worsens as scores fall and LTV rises. Higher scores also open the door to lanes like the 89.99% no-mortgage-insurance option at 680.
Will the home’s appraisal change my cash?
Yes, directly. The cap is a percentage of appraised value, so a lower appraisal reduces the largest loan you can take. Your payoff doesn’t move, which means the shortfall comes out of your cash.
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. For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s conventional loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide archive, B2-1.3-03 (10/07/2020)
4. Fannie Mae B2-1.3-04, Prohibited Refinancing Practices
5. CFPB, Using home equity to meet financial needs
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Refinance Appraisal Came In High: Can You Borrow More Or Drop PMI Sooner? · Conventional Refinance Debt-to-income Limits: 45%, 50% And The Compensating Factors · Conventional Refinance With Less Than 20% Equity: PMI, Loan-to-Value And The Options
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.