The Quick Read: Freddie Mac does not use the phrase “limited cash-out” at all. Its Guide calls the same idea a “no cash-out” refinance. The new loan pays off your existing first mortgage and the costs of closing, and you walk away with only a small, capped amount of cash. Tip past that cap and the loan becomes a true cash-out refinance with different leverage, seasoning and ownership tests.
Key Takeaways
- “Limited cash-out” is Fannie Mae’s label. Freddie Mac’s version is “no cash-out.” The two are close cousins, not twins.
- On a one-unit primary residence, the rate-and-term lane reaches 95% loan-to-value (LTV), and 97% in a narrow case. A true cash-out stops at 80%.
- The test is what the money does at closing. Your intent does not count.
- Paying off a home equity loan you took for other purposes usually turns the loan into a cash-out.
- Every figure here is subject to lender guidelines and full file review. Nothing here is a commitment to lend.
What Does “Limited Cash-Out” Mean at Freddie Mac?
It means a refinance that changes your loan, not your cash position. Freddie Mac defines this in Seller/Servicer Guide Section 4301.4 as a “no cash-out” refinance. The proceeds can retire your first mortgage, cover closing costs and prepaids, and pay off certain other items. Cash to you is allowed only up to a small cap.
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.
That cap is set as a percentage of the new loan or a flat minimum, whichever is greater. Read the current Guide text for the exact figure. It changes, and web guides often repeat stale versions.
Fannie Mae’s own section, B2-1.3-02, uses the “limited cash-out” name. Its cash-back formula now matches Freddie’s, but the other tests do not line up one for one. If you read an article that mixes the two names without comment, treat its specifics with caution.
Here is how the two refinance types sit side by side for a one-unit primary residence.
| Factor | Limited / no cash-out | True cash-out |
|---|---|---|
| Purpose | Change rate or term | Pull equity out |
| Cash back | Small, capped | Any amount within LTV |
| Max LTV | 95% (97% in a narrow lane) | 80% |
| Loan being paid off | No seasoning test | At least 12 months old |
| Time on title | No set minimum | 6 months |
The leverage and seasoning figures in that table reflect the conventional programs Lendmire places through wholesale lenders. Rate-and-term files and cash-out files are priced and reviewed differently because cash-out loans carry higher default risk, per the FHFA Office of Inspector General.
Many homeowners start by exploring cash-out refinance programs and discover their actual goal fits the limited lane better. The reverse happens too.
How Is the Loan Underwritten, Step by Step?
The lender classifies the loan by what the money does, then runs the file through the rules for that class. Here is the sequence a broker sees on most conventional files.
1. Classify by use of proceeds. The lender lists every dollar leaving the closing table. First-lien payoff, closing costs and prepaids fit the limited lane. A big check to you does not.
2. Check borrower eligibility. Freddie’s rules in Section 4301.2 govern who may be on the new loan. People already on the old loan are the simplest case. Others, such as heirs or family members with a payment history, need specific documentation.
3. Document the payoffs. The credit report or title commitment proves the debts being retired. A junior lien needs a closer look, covered below.
4. Set value and LTV. The new first-lien amount is divided by the appraised value, or by the value the automated system accepts. Under Guide Section 4203.1, the ratio rounds up to the next whole number. A tiny overage still counts as the next point.
5. Run the underwriting. Most loans go through Freddie’s automated system. The conventional programs in our network generally start at a 620 decision score, with a total debt ratio ceiling of 50% on automated findings. Manually underwritten files use tighter ratios of 36% or 45%, with reserve and score factors.
6. Handle excess proceeds. Leftover money cannot simply go to you. The loan amount drops, or the excess goes to principal. Confirm the treatment in the Guide for your file.
7. Disclose and close. You receive a Loan Estimate and a Closing Disclosure. Compare the final costs against your first estimate before you sign.
Skip any step and the file bounces back. Most delays come from step 1 done too late.
What Can the New Loan Pay Off?
The new loan can pay off your existing first mortgage, the closing costs, points and prepaids, and in some cases a second lien. The second lien is where files get reclassified.
A purchase-money second. If you used a second mortgage to buy the home, it can be rolled in. That is the standard exception for a rate-and-term refinance.
A home equity loan or HELOC used for something else. Say you opened a HELOC to remodel a kitchen, then refinance and pay it off. Lenders generally treat that as cash-out, even if you get no check. The debt was never part of buying the house. Fannie Mae’s rule is explicit that only subordinate liens used to purchase the property may be paid off in a limited cash-out. Freddie’s rule on junior liens is spelled out in Section 4301.4, so read it before assuming a HELOC can ride along.
A land contract. Freddie’s Guide allows payoff of a land contract or contract for deed under conditions. The contract must have been in place for a set period, the file needs third-party payment documentation, and LTV uses the current appraised value.
Past-due property taxes. These generally cannot be paid from the proceeds of a no-cash-out refinance, subject to the exception in the Guide text.
The Guide sections also cover occupancy and property types. Most borrowers reading this want the primary-residence path. One sentence on the others: second homes and investment properties run lower leverage than a primary residence, so occupancy decides your ceiling.
How Much Can You Borrow Against the Home?
On a one-unit primary residence, a rate-and-term refinance reaches 95% LTV. That matches the standard purchase leverage on the same home. Two- to four-unit principal residences also top out at 95% on purchase, so check your property type before assuming. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Mortgage insurance applies above 80% LTV. You can ask to cancel it at 80% of the original value if you have a good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%, under the Homeowners Protection Act. Published typical annual premiums run from 0.58% to 1.86% of the balance. That is a range, not a quote. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A 97% ceiling exists too, but only where the existing loan is agency-owned and the first-time-buyer program allows it. Some lenders add their own limits on top of Freddie’s, such as excluding adjustable rates or loans above the standard conforming size from that top band. That is a lender overlay, not a Freddie rule, so ask early.
Where the General Rule Breaks
The rule of thumb says “no cash-out means a simple refinance.” These edge cases show where that falls apart.
You cross the cash-back cap. Even a modest overage can force true cash-out treatment. Cash-out drops the maximum to 80% LTV on a one-unit primary residence. It drops to 75% on two- to four-unit principal residences, second homes and investment property. A borrower sitting at 90% LTV who wants to pull equity out is not a limited cash-out borrower. Period. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Seasoning and title. A true cash-out requires the first mortgage being paid off to be at least 12 months old, counting note date to note date. It also requires at least one borrower on title for 6 months, under Guide Section 4301.5. Exceptions exist for delayed financing, inheritance and legal awards. Seasoning and title tests sit in the cash-out section, so a no-cash-out refinance does not carry them in the same way.
Back-to-back refinances. Fannie Mae’s prohibited refinancing practices rule blocks a limited cash-out if the borrower completed a cash-out refinance just before the new application. Freddie may have a similar test. Verify before assuming a recent refinance will not matter.
Non-occupant co-borrowers. On a cash-out refinance of a primary residence, Freddie’s Bulletin 2023-24 requires all borrowers to occupy the home. A parent co-signing from another address fits a limited lane more easily than a cash-out.
LLC-held homes. Fannie Mae’s limited cash-out does not accept LLC ownership. Freddie’s cash-out section has a specific route that requires transfer into the borrower’s name. Do not assume your entity counts.
Special-purpose cash-out. If you are buying out a co-owner, say after a divorce, the loan follows Freddie’s special-purpose rules in Section 4301.6. It must meet all cash-out requirements except where the section modifies them. That is the route when your goal is a buyout rather than a rate change.
Refi Possible. Freddie runs a program aimed at low- and moderate-income borrowers, with requirements in Guide Chapter 4302. See Freddie Mac’s Refi Possible page for the official description. Lender summaries say the existing loan must be Freddie-owned. Confirm before counting on it.
Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure. One wholesale lane we use for higher leverage without mortgage insurance is not written there.
What About a Higher-Leverage Cash-Out?
One wholesale lane reaches 89.99% LTV with no mortgage insurance on a primary residence. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a conforming balance and its own six months of seasoning. That is a niche product, not the standard cash-out path. It suits a borrower who needs real cash and has the equity and credit to support it. It is not a limited cash-out at all. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Credit, Ratios and Past Credit Events
Credit rules look the same across the limited and cash-out lanes. The wholesale conventional programs generally start at a 620 decision score, and 640 on an adjustable rate under manual underwriting. The automated finding governs most files.
Waiting periods after credit events are agency rules. They run four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them. These are the agencies’ rules, not a broker’s discretion.
How the Decision Looks in Practice
Picture a homeowner who bought with 5% down several years ago and now carries about 75% LTV. The goal is dropping mortgage insurance and shortening the term. That is a limited cash-out profile: pay off the first, roll in closing costs, take no meaningful cash. Whether it makes sense turns on break-even. Closing costs can add up to several percentage points of the loan amount, so the refinance may not pay off unless the new terms are materially better, as CFPB Director Rohit Chopra observed in archived remarks. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Now picture a second homeowner at 70% LTV who wants cash for a roof and a college bill. That file is a true cash-out. Leverage tops out at 80% on a one-unit primary residence, the 12-month and 6-month seasoning tests apply, and pricing and mortgage insurance differ. The same owner might also compare a HELOC and keep the low first mortgage. Lendmire’s piece Limited Cash-Out vs Cash-Out Refinance Rules for a Low First Mortgage walks through that tradeoff. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Three questions settle most files:
- Does any money beyond the payoff and costs come back to you?
- Is a home equity loan, HELOC or other junior lien being paid off, and what was it used for?
- Will the new loan sit at or below the leverage cap for your occupancy and unit count?
An answer of “yes” on the first two, or “no” on the third, moves you toward the cash-out table. Another smaller cost: an owner’s title policy does not carry over to a new lender, so budget for new title coverage.
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 brokerage arranges conventional loans through wholesale lenders in 16 states, and it can reach you at 828-256-2183.
Key Terms Defined
Limited cash-out refinance: Fannie Mae’s name for a refinance that pays off the first mortgage and costs and returns only incidental cash. Freddie Mac calls its version a “no cash-out” refinance.
Loan-to-value (LTV): The new loan balance divided by the home’s value, shown as a percentage.
Seasoning: The minimum age of the loan being paid off, or the time you have owned the home, before a lender will refinance it as a cash-out.
Junior lien: Any mortgage behind your first, such as a HELOC or home equity loan.
Special-purpose cash-out: A cash-out refinance used for a defined purpose, like buying out a co-owner, with its own rules layered on the standard cash-out requirements.
Frequently Asked Questions
Is a limited cash-out refinance the same as a Freddie Mac no cash-out refinance?
Close, but not identical. Fannie Mae uses “limited cash-out,” Freddie Mac uses “no cash-out,” and the cash-back formulas now match. Leverage tables, seasoning and ownership tests still differ, so read the section for the agency that backs your loan.
Can I get any cash back at all?
Yes, a small amount. The Guide caps it at the greater of a small percentage of the new loan or a flat minimum. Go over that and the loan is treated as a cash-out, with lower maximum leverage.
Can I roll my HELOC into the new loan?
Often not. If the HELOC or home equity loan was used to buy the home, it can generally be included. If it funded something else, paying it off usually makes the loan a cash-out. Freddie’s junior-lien treatment is in Section 4301.4.
Does my loan need to be a certain age before I refinance?
Not for a rate-and-term lane in the same way. The 12-month rule on the loan being paid off, and the 6 months on title, belong to cash-out refinances.
Can I use this to refinance a rental or second home?
Occupancy decides leverage. Second homes run lower than a primary residence, and investment property lower still. This article covers owner-occupied homes, so a rental needs a separate conversation.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Freddie Mac Seller/Servicer Guide 4301.4, “No cash-out” refinance
2. Fannie Mae Selling Guide B2-1.3-02, Limited cash-out refinance transactions
3. FHFA Office of Inspector General
4. Freddie Mac Guide 4203.1, LTV, TLTV and HTLTV
5. Freddie Mac Guide 4301.5, Cash-out refinance
6. Fannie Mae Selling Guide B2-1.3-04, Prohibited refinancing practices
8. Freddie Mac’s Refi Possible page
9. CFPB Chopra remarks (archive)
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 to Refinance Out of PMI After Buying at the Wrong Time · How Much a Conventional Loan Refinance Can Lower the Payment · How to Refinance a 2-4 Unit Primary Home to Drop PMI
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.