The Quick Read: Freddie Mac limits a primary-home cash-out refinance in two ways: a percentage-of-value cap and a loan-size ceiling. The percentage cap usually binds first. On a one-unit primary home it is 80% of appraised value, counting every lien, and it drops to 75% on a two- to four-unit primary home. The cash you receive is always smaller than that, because the payoff, other liens and financed costs come out of the same headroom.
Most homeowners hear “I can borrow 80% of my equity.” That is wrong. The cap is 80% of the home’s value, and all liens on the property count against it. Equity is what’s left over, so you always keep at least 20% of it on a one-unit 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: 7.32% 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.
This piece walks through the mechanics: what the cap measures, how the loan is built step by step, the structures that change the math, and where the general rule breaks. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
What Does “Cash-Out” Mean to Freddie Mac?
A cash-out refinance, in Freddie’s Seller/Servicer Guide, is a mortgage with no specific restrictions on how the proceeds are used. Borrowers use it for debt consolidation, home improvements or a co-owner buyout. Closing costs and prepaids can be rolled into the new balance.
Here’s the catch: a refinance with only small incidental cash back is treated differently. Freddie calls that a “no cash-out” refinance, and it carries a much higher leverage cap. Once the cash back passes the small allowance, the loan is cash-out and the lower caps apply. Borrowers who expected a rate-and-term can end up with cash-out treatment because of a few extra thousand at closing.
For the program overview, see Lendmire’s cash-out refinance programs.
Key Takeaways
- The cap is a percentage of appraised value, not of equity.
- One-unit primary: 80%. Two- to four-unit primary: 75%.
- Second liens and HELOCs count toward the cap.
- Seasoning applies to both the title and the existing first mortgage.
- The new loan must also fit under the county conforming limit.
The Two Limits, Side by Side
| Limit | What it measures | Who sets it | How it changes |
|---|---|---|---|
| Percentage cap | Total liens vs. appraised value | Freddie Mac Guide | Changes only by policy update |
| Loan-size ceiling | Dollar size of the new loan | FHFA, by county | Resets each year |
The percentage cap is in Guide Section 4203.1: 80% for a one-unit primary residence and 75% for a two- to four-unit primary residence. The tested ratio covers the first mortgage plus any junior lien or HELOC. Fannie Mae’s Eligibility Matrix shows the same primary-home cash-out caps, so the two agencies line up on leverage.
The loan-size ceiling is the conforming loan limit. It is county-specific and resets annually, so check FHFA’s county lookup for your own number. Homes in high-cost counties carry a higher ceiling.
Which one binds first? On most homes, the percentage cap. The dollar ceiling only matters when the home is valued high enough that 80% of value exceeds the county limit. That mostly happens in expensive markets.
How the Loan Is Underwritten, Step by Step
Run it in order. This is how a file gets built.
1. Start with appraised value. Underwriting begins here. In some cases the valuation process allows an appraisal waiver, but that depends on the automated findings and the lender.
2. Apply the cap. Maximum total liens equal appraised value times 80% (one unit) or 75% (two to four units). A HELOC or second mortgage that stays in place counts against the cap.
3. Subtract the payoff. The new loan must pay off the existing first mortgage and any liens that must be cleared.
4. Subtract financed costs. Closing costs and prepaids rolled into the loan use the same headroom as your cash. Every cost you finance is cash you don’t receive.
5. What remains is your cash. It is always less than your equity, and usually less than you first estimate.
6. Run the gate checks. Seasoning, occupancy, credit and ratios all have to pass. The new loan must also sit under the conforming limit.
Picture a homeowner with a home worth a round figure and an existing first mortgage at a modest share of value. On a one-unit primary, the cap leaves room between the existing balance and 80% of value. Financed costs shrink that room before any cash is paid out. Say the existing balance already sits near 70% of value. Then the available headroom is about ten points of value, minus costs. No dollar math needed to see how thin that gets.
The Gate Checks That Cap You Before Math Does
The percentage is only the ceiling. These tests decide whether you reach it.
Title seasoning. At least one borrower must have been on title for six months before the note date. Exceptions exist, including delayed financing for a cash purchase, inheritance and legal awards.
First-lien seasoning. If the proceeds pay off a first mortgage, that loan must be at least 12 months old, counted from note date to note date. Exceptions include a first lien that is a HELOC and a special-purpose cash-out. This is the rule that catches homeowners who refinanced recently. The wait is counted in months from the old note, so document the old note date early.
Occupancy. On a primary-residence cash-out, every borrower must live in the home. A non-occupant co-borrower doesn’t fit this structure.
Credit and ratios. In the wholesale programs Lendmire works with, conventional files generally start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run tighter, at 36% or 45%, with reserve and score factors from the Eligibility Matrix. Some lenders set higher floors than the agency minimums.
Credit fees. Freddie applies loan-level credit fees that depend on loan amount and leverage. They are part of the cost picture, so ask for the Loan Estimate and read the cost lines.
Structures and Variations
Cash-out vs. no cash-out. The no-cash-out cap on a one-unit primary is 95%, against 80% for cash-out. That 15-point gap is why a few thousand in extra cash back can shrink the loan. A no-cash-out refinance allows cash back only up to the lesser of 1% of the new loan or $2,000. Past that, it is cash-out. In the conventional rate-and-term lane, a one-unit primary can reach 95% LTV, and the new loan pays off the first mortgage, closing costs and a purchase-money second lien. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Two- to four-unit primary. The cap falls to 75%. You live in one unit and rent the others, but the loan is still a consumer mortgage on your home. Because the cap is lower, you keep more equity in the property.
Second liens and HELOCs. The cap measures total liens. A HELOC you keep sits inside the 80%, so it cuts the headroom for the new first mortgage. Paying it off in the refinance frees the headroom but uses cash to do it. A HELOC taken after purchase and used for cash can also push a later refinance into cash-out treatment.
A lane with higher leverage. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence and a conforming balance, with its own six months of seasoning. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure, and that wholesale lane is not written there. Qualification is subject to lender guidelines.
Where the General Rule Breaks
These edge cases change the answer.
- Co-owner buyout. Freddie’s special-purpose cash-out limits the loan to what buys out the co-owner’s equity. The first mortgage can be paid off regardless of age. Junior liens secured by the property can also be paid. Both parties sign a written agreement. This is the case where the 12-month rule doesn’t apply.
- Delayed financing. A home bought with cash can be refinanced before six months of title seasoning. The new loan is capped at the documented purchase price plus costs.
- Free and clear homes. A home owned with no mortgage that is refinanced for cash is still a cash-out refinance.
- HELOC as the first lien. Exempt from the 12-month first-lien test.
- Manufactured homes. The cash-out cap is lower, and some versions of the guidelines exclude single-width homes. Check eligibility before planning on the primary-home cap.
- Second homes and rentals. Occupancy sets the leverage, and a lower cash-out cap of 75% applies there. Everything above is about the home you live in.
- Refi Possible. Freddie’s Refi Possible is a no-cash-out program for lower-income borrowers on a one-unit primary. It does not apply to cash-out.
What Happens to Mortgage Insurance?
Mortgage insurance is required above 80% LTV. The cash-out cap on a one-unit primary sits at 80%, so a standard cash-out generally lands at or below the threshold. The existing policy ends when the old loan is paid off. If you use the higher-leverage lane described above, that is a separate structure with its own conditions. When a new loan does carry insurance, you can request cancellation at 80% of original value, and the servicer must end it automatically at 78%, subject to the Homeowners Protection Act conditions.
What the Decision Looks Like in Practice
The cap tells you how much you can borrow. It doesn’t tell you whether you should. The CFPB reports that paying off other debts is the most common reason people take cash out. The same release notes that paying non-mortgage debt with mortgage debt can raise foreclosure risk. It also found credit-score gains faded after the first quarter.
A cash-out replaces the first mortgage with a larger one. That resets the rate and the term, and it can raise the monthly payment or stretch the payoff. A home equity loan or HELOC instead adds a second payment and leaves the first mortgage alone. No product turns 100% of equity into cash.
Work through it in this order:
1. Get the appraised value and your current payoff.
2. Apply the cap for your unit count.
3. Subtract payoff, other liens and financed costs.
4. Check seasoning dates and occupancy.
5. Compare the result with the cash you need. If it falls short, take less cash, pay down first, keep the current loan, or look at a different structure.
Key Terms Defined
LTV: The loan balance divided by the home’s appraised value.
TLTV / HTLTV: Total loan-to-value, including junior liens, and the version that counts the full HELOC limit.
Conforming loan limit: The county-based dollar ceiling on loans Freddie Mac and Fannie Mae can buy.
Seasoning: The minimum time you have held title or the existing loan has been in place.
Note date: The date the mortgage note is signed, used to count loan age.
Common Misconceptions
- “I can borrow 80% of my equity.” It is 80% of value, with all liens counted.
- “Cash back makes it a rate-and-term.” Past the small allowance, it is cash-out.
- “Six months of ownership is enough.” The 12-month first-lien test also applies, unless an exception fits.
- “Fannie and Freddie are identical.” Primary-home caps match, but edge cases differ. Buyouts are one example.
- “Every lender gives the maximum.” Individual lenders can set tighter limits than the agency caps.
Frequently Asked Questions
Does the 80% cap include my HELOC?
Yes. The tested ratio counts all liens, so a HELOC that stays open uses part of the 80%. Paying it off in the refinance frees that room but takes cash to do it.
Why is my cash less than 80% of my home’s value minus my balance?
Financed closing costs, prepaids and any liens being paid off come out of the same headroom. What’s left is your cash, and it is always less than the gross room under the cap.
Can I refinance for cash right after I refinanced?
Usually not for 12 months. The first mortgage being paid off must be at least 12 months old, counted note date to note date. A HELOC first lien and a special-purpose buyout are exceptions.
Does the conforming limit change how much cash I can take?
Only when 80% of your value would exceed your county’s limit. Then the dollar ceiling binds first. Otherwise the percentage cap does, so check your county’s number with FHFA.
What if the numbers come in under what I need?
Take less cash, pay down the balance first, keep your current loan and use a separate second lien, or look at a jumbo structure if the amount is above the limit.
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.
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.
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. Freddie Mac Seller/Servicer Guide §4301.5
2. Freddie Mac Seller/Servicer Guide §4203.1
3. Fannie Mae Eligibility Matrix
4. Freddie Mac Seller/Servicer Guide §4301.6
6. CFPB
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 2-4 Unit Primary Home Conventional Refinance Can Finance · How Much a Conventional Loan Refinance Can Lower the Payment · Refinance vs PMI Cancellation on a 2-4 Unit Primary Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.