The Quick Read: The standard conventional route for thin equity is the limited cash-out refinance, which is also called a rate-and-term refinance. On a one-unit principal residence it reaches 95% LTV, and up to 97% when the existing loan is agency-owned and the program allows. The two programs once built for deeply underwater borrowers are not open in their original form, so your path runs through the standard rules below. Everything here is subject to lender guidelines and full file review.
What “High-LTV” Means Here
LTV is loan-to-value: your new loan balance divided by your home’s value. A 95% LTV means you keep 5% equity. A refinance with little equity is simply one where that number sits high. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Refinance savings and break-even estimate
The starting figures are an example value with a balance in proportion and a placeholder for costs. Replace them with yours, and enter the current rate from your statement.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $245,000 current balance, a current rate you enter and a remaining term seeded at twenty-five years, closing costs seeded at $5,000 as an editable placeholder (not a fee quote) and rolled into the new loan, 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 new rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a refinance quote; a refinance is priced by the lender at lock, and the current rate, the remaining term and the closing costs are figures you enter. The current payment is estimated from the balance, the current rate and the remaining term; the break-even divides the closing costs by the monthly saving and ignores the interest effect of a longer term. On the VA IRRRL the funding fee is added to the loan unless the veteran is exempt. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages; Lendmire is a broker, never the lender.
Two details trip people up. First, the new loan is what counts, so closing costs you roll in raise your LTV. Second, the value comes from an appraisal or another acceptable valuation method. You do not pick the number.
Here is the plain answer to the question most readers arrive with. You do not need 20% equity to refinance conventionally. You need enough equity to land under the ceiling for your property, and you pay mortgage insurance when the result is above 80%.
Lendmire's conventional loan programs cover this lane, and Lendmire arranges these loans through wholesale lenders as a mortgage broker.
Key Takeaways
- A limited cash-out refinance on a one-unit principal residence reaches 95% LTV, and 97% in the agency-owned case.
- Mortgage insurance applies above 80% LTV.
- The old "high-LTV refinance" programs are suspended or closed to delivery. Do not plan around them.
- Existing-loan ownership, occupancy, payment history and the appraisal decide most outcomes. Final terms depend on the lender's guidelines, the property type, and the borrower's complete credit picture.
Key Terms Defined
Limited cash-out refinance: a refinance that pays off your first mortgage, closing costs and any purchase-money second lien, with only incidental cash back to you.
LTV (loan-to-value): your loan balance as a percentage of the home's value.
Mortgage insurance: coverage that protects the lender when you put down less than 20%. You pay for it, and it can end later.
Agency-owned loan: a mortgage owned or packaged into securities by Fannie Mae or Freddie Mac.
Automated underwriting: software that reviews income, assets, credit and debts and returns a finding that drives the paperwork you must supply.
Seasoning: the age a loan or ownership period must reach before a certain refinance is allowed.
What Are the Leverage Ceilings?
Leverage ceilings depend on three things: the transaction type, how you use the home, and the unit count. Here is how the agency limits line up for refinances.
| Refinance type | Property | Max LTV |
|---|---|---|
| Limited cash-out (fixed) | One-unit principal residence | 97% |
| Limited cash-out (adjustable) | One-unit principal residence | 95% |
| Limited cash-out | Two- to four-unit principal residence | 95% |
| Limited cash-out | Second home | 90% |
| Cash-out | One-unit principal residence | 80% |
| Cash-out | Two- to four-unit, second home, investment | 75% |
These come from the Fannie Mae Eligibility Matrix. Across the wholesale programs placed through Lendmire, the practical rate-and-term ceiling on a one-unit home is 95%, with 97% where the existing loan is agency-owned and the program allows.
The gap between 80% and 95% is the whole story of cash-out versus rate-and-term. If you want money out of the house, you need far more equity. If you only want a new loan that replaces the old one, the ceiling sits much higher.
One sentence on rentals: occupancy decides leverage, and the table shows that a second home or non-owner-occupied property gets a lower ceiling.
How Is the Loan Underwritten, Step by Step?
Underwriting follows a set sequence. Knowing it tells you where a file can stall.
Step 1: Compute LTV on the new loan. Add your payoff, financed closing costs and any purchase-money second lien. Divide by the value. That sum must pass the limited cash-out test: proceeds pay off the first mortgage and costs, with only a small amount of cash back. The agency revised that cash-back cap recently, so ask your loan officer for the current figure rather than relying on an old number.
Step 2: Confirm who owns your current loan. Above 95%, Fannie Mae's limited cash-out rules require the lender to tell Desktop Underwriter that Fannie Mae owns or securitizes the existing loan. If Freddie Mac owns it instead, that agency's options apply. This is the step borrowers never see coming, and it can sink a file that otherwise looks fine.
Step 3: Run automated underwriting. Income, assets, credit and debts are reviewed as in any conventional refinance. The wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a 50% total ratio ceiling. Manually underwritten loans use 36% or 45% ceilings, with the reserve and score factors in the Eligibility Matrix.
Step 4: Establish value. Sometimes the software offers value acceptance, which means no appraisal. A lender may use it only if no appraisal was obtained and the offer is recent, per Fannie Mae's value acceptance rules. If an appraisal exists, it must be used. Manually underwritten high-LTV loans never get a waiver.
Step 5: Mortgage insurance. Above 80% LTV, expect it. The insurance is placed based on the final LTV. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Step 6: Closing. The lender documents the payoff of the old loan and any financed costs.
What Happened to the Old High-LTV Programs?
They are history, and no honest article should present them as an open door.
Fannie Mae's High LTV Refinance Option was built for borrowers who paid on time but sat above the standard limit. It allowed financing above the usual conventional LTV ceiling on a one-unit home, with no maximum for fixed-rate loans. Fannie Mae's own matrix now states that acquisition of high-LTV refinance loans is suspended. The Selling Guide pages are still online, but the matrix controls availability. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Freddie Mac's Enhanced Relief Refinance is in the same state. Its Guide section 6302.40 says those mortgages are not eligible for delivery until further notice. HARP, the program that came first, has expired.
So what do you do at 97.01% or higher? The standard limited cash-out is out of range. That was the gap the suspended programs filled. Realistic options now are paying down the balance, waiting for the value to rise, or looking at the income-restricted programs or a government streamline.
What About RefiNow and Refi Possible?
Two relief options still operate, and both come with strings.
Fannie Mae's RefiNow is for lower-income borrowers. The existing loan must be conventional, owned by Fannie Mae and seasoned at least 12 months. The new loan must be fixed-rate and a limited cash-out refinance with $250 or less in cash back, and it must fit within the general loan limits. You can use it only once. Per Fannie Mae's requirements sheet, there is currently no expiration date.
Freddie Mac's Refi Possible is also income-restricted, with an income cap tied to area median income. It requires a meaningful drop in the interest rate. On loans above 80% LTV it also requires a lower combined payment. Freddie Mac Bulletin 2021-17 introduced it. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Both options run on the same principle. The refinance must visibly help you, and the agency must already own your loan. Lenders may add their own overlays, so availability differs from one lender to the next.
Where Does the General Rule Break?
These edge cases change the answer.
- Adjustable versus fixed. The 97% ceiling applies to fixed rates. An adjustable loan caps at 95% on a one-unit principal residence.
- Unit count and occupancy. Two- to four-unit principal residences stop at 95%. Second homes stop at 90%.
- Loan owned by the wrong agency. If the ownership test fails, the 95.01% to 97% tier is unavailable.
- High-balance loans. RefiNow does not allow them. Above the conforming limit, jumbo lanes take over. Across the wholesale programs placed through Lendmire, those start at a 660 decision score with leverage to 90%.
- Second liens. A purchase-money second can be paid off within a limited cash-out. Paying off a home equity line used for other purposes can reclassify the loan as cash-out, which drops the ceiling to 80% on a one-unit home.
- Adding or removing borrowers. Adding borrowers is generally not allowed in these programs. Removal depends on payment history and proof the remaining borrower made the payments.
- Credit events. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
- Government streamlines. If your current loan is FHA or VA, a different system applies. An FHA Streamline can skip the appraisal and use limited credit review, and a VA IRRRL works similarly, each with a net tangible benefit test. Those are alternatives, not conventional options.
Common Reasons Files Get Denied
| Problem | Typical fix |
|---|---|
| Value comes in low | Pay down the balance or wait |
| Existing loan not agency-owned | Try a different program |
| Recent late payments | Wait until history clears |
| Rolled-in costs push LTV over | Pay costs in cash |
| Wrong occupancy | Match the program to how you use the home |
Appraisal risk deserves its own sentence. A small valuation change can move you across the 95%, 97% or 80% thresholds, and that changes both eligibility and pricing. Run your numbers with a cushion.
What Does Mortgage Insurance Do Later?
Above 80% LTV, mortgage insurance is part of the deal. Published typical annual premiums run 0.58% to 1.86% of the balance. That is a range, never a quote, and your own cost depends on the file. Exact terms depend on the lender's guidelines, property type, leverage, and a full review of the borrower's file.
The good news is that it ends. Under the Homeowners Protection Act, you can request cancellation when your balance is scheduled to reach 80% of the original value. You need good payment history and no subordinate liens, and the servicer may ask for proof the value has not dropped. The servicer must end it automatically at 78% if you are current. The CFPB explains the conditions.
Here is the catch. A refinance resets the "original value" reference to the new appraisal. Your clock effectively restarts, which matters if you were close to dropping the insurance on the old loan.
Is It Worth Doing? A Break-Even View
A refinance with little equity costs money in three places: closing costs, mortgage insurance, and a longer horizon before the insurance can end. Savings must beat all three.
Picture a homeowner with 5% equity and a loan that is a year old. The new loan lowers the monthly payment, but rolling in costs pushes LTV up and keeps insurance in place. Divide total costs by monthly savings to get the break-even point in months. If you might sell or move before then, skip it.
Waiting can win. If your equity is growing, a few more payments or a modest paydown could drop you under 80% and remove insurance from the picture. Lendmire's piece on whether you can get a conventional cash-out refinance with little equity covers that side if you also want cash back.
What to Gather Before You Apply
- Recent pay stubs, or income records if self-employed
- Bank and asset statements
- Your current mortgage statement, so ownership can be checked
- Homeowners insurance details
- Photo ID and housing history
Across the wholesale programs placed through Lendmire, the files that move smoothly are the ones where ownership of the existing loan is checked first. That one step saves borrowers from paying for an appraisal on a path that was never open.
Frequently Asked Questions
Do I need 20% equity to refinance a conventional loan?
No. A limited cash-out refinance on a one-unit principal residence reaches 95% LTV, and 97% where the existing loan is agency-owned and the program allows. You pay mortgage insurance above 80%. Cash-out refinances need more equity, with a one-unit principal residence capped at 80%. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Can I refinance if I owe more than my home is worth?
Not through a conventional program available today in its original form. Fannie Mae's high-LTV option is suspended and Freddie Mac's version is not eligible for delivery. Options include paying down the balance, waiting for value to rise, or checking an FHA, VA or income-restricted path if you qualify.
What credit score do I need?
The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files. Some lenders set a higher floor. Manual underwriting and adjustable rates can carry stricter requirements, subject to lender guidelines.
Will I need an appraisal?
Sometimes not. Automated underwriting can offer value acceptance, which skips the appraisal if conditions are met. If an appraisal is obtained anyway, it must be used. Manually underwritten loans do not get a waiver.
Does a refinance restart my mortgage insurance clock?
Yes. The original-value reference resets to the new appraisal. You can request cancellation at 80% of that value, and it ends automatically at 78% if you are current.
If you are weighing a refinance and want the break-even run on your own numbers, Lendmire can help you compare the programs on the same home. Program details are subject to lender guidelines and are not 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.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
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 Eligibility Matrix
2. Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
3. Selling Guide B4-1.4-10, Value Acceptance
4. Fannie Mae Eligibility Matrix (high LTV suspension notice)
6. Fannie Mae's requirements sheet
7. Freddie Mac Bulletin 2021-17
8. CFPB: When can I remove PMI from my loan?
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much Equity a Conventional Cash-Out Refinance Lets You Tap · Can a Repeat Buyer Get a Conventional Loan With Little Down? · Does a Conventional Cash-Out Refinance Let You Turn Equity Into Cash?
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.