The Quick Read: A cash-out refinance replaces your first mortgage with a bigger one. A home equity line leaves that mortgage alone and adds a second loan behind it. On a one-unit primary residence, the standard conventional cash-out cap is 80% of the home’s value. A line has no single cap, because each lender sets its own combined limit. Above the standard cap, a narrower wholesale lane reaches 89.99%, subject to lender guidelines and full file review.
Here is the honest answer on who each option is for. A cash-out refinance fits you when your current first mortgage is worth replacing, or when you want one large sum and one loan. A home equity line fits you when the first mortgage is worth keeping, or when you need money in pieces over time. The “higher-LTV” version of the cash-out is for the homeowner who needs more than the standard cap releases and whose file fits a tighter set of conditions. Lendmire’s cash-out refinance programs page covers how that first-lien path works.
Key Takeaways
- The standard conventional cash-out cap is 80% of value on a one-unit primary residence, and 75% on two- to four-unit homes, second homes and investment property.
- A line of credit is a second lien. Its limit comes from the lender’s own policy, and it counts toward your total debt against the home.
- Above 80%, one wholesale lane reaches 89.99% with no mortgage insurance on a thirty-year fixed. It needs a 680 score, a 50% total ratio, a primary residence and a conforming balance.
- Neither option is cheaper by default. The answer depends on your existing loan, how much you need and how you plan to repay.
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: 7.18% as of November 5, 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.
Side-by-Side
The table compares the two paths on the points that decide eligibility. It leaves out pricing, because pricing depends on your file and the day you apply.
| Factor | Cash-Out Refinance | Home Equity Line |
|---|---|---|
| What it is | New first mortgage replaces the old one | Second lien added behind the first |
| Standard leverage | 80% on a one-unit primary home | Lender-set combined limit |
| Above the cap | Wholesale lane to 89.99% (conditions apply) | Only if that lender allows it |
| Credit floor | 620 decision score on wholesale conventional | Set by each lender |
| Mortgage insurance | None at or below 80%; none in the higher lane | Generally none on a second lien |
| Occupancy | Primary, second home or investment; occupancy sets leverage | Set by each lender |
| Documentation | Full file review and appraisal | Varies by lender |
| Your current mortgage | Paid off and replaced | Stays in place |
| Money comes as | One lump sum at closing | Draws during a draw period |
Two cells deserve a note. The 620 figure is a starting point on the wholesale conventional programs, and the automated finding governs most files. Mortgage insurance is required above 80% on the agency path, with the wholesale no-mortgage-insurance cash-out lane as the exception. Mortgage insurance rarely comes up in a standard cash-out, because the standard cap stops at 80%.
What “the Standard Cap” Actually Means
The standard cap is the most a conventional first-lien cash-out will normally lend against your home’s value. For a one-unit primary residence, that is 80% loan-to-value (LTV), the loan balance divided by the home’s value. On a two- to four-unit primary residence, a second home or an investment property, the cap drops to 75%. Occupancy sets the leverage, and that is all this article will say about rentals.
Government loans use different ceilings. HUD Mortgagee Letter 2019-11 cut the FHA cash-out limit to 80% of adjusted value, and it applies to combined debt too. A second lien you keep counts against that same cap. The VA says on its purchase and cash-out page that you may refinance up to 100% of the appraised value. That is a “may.” Individual lenders can set limits below it.
Now the line. A home equity line has no program-wide cap. The lender picks a combined LTV, which adds your first mortgage and the full credit limit of the line, then divides by the home’s value. The full limit counts, not just the amount you have drawn. A line with a small balance can still use up room you wanted for something else.
That is why the comparison gets interesting near the cap. A line cannot hide from the leverage math. It lives in the same stack of debt against the same house.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance wins when replacing the first mortgage is a good idea on its own. Maybe the term or loan type no longer suits you. Maybe you want to drop an adjustable structure for a fixed one. Maybe you are carrying a first mortgage and a second lien, and you want one loan instead of two. Paying off both in a single new first mortgage simplifies the picture.
It also fits when you want a lump sum for a defined purpose. A one-time cost, such as a major renovation with a fixed budget or paying off higher-cost debt, matches a single disbursement. You know the amount and you take it once.
A third case is a large equity need. When the amount you want pushes past what a line would give you, the first-lien lane is usually where the bigger number lives. Across the wholesale programs Lendmire places files with, the higher-LTV lane is built for exactly that homeowner. It reaches 89.99% on a thirty-year fixed with no mortgage insurance. The conditions are tight: a primary residence, a conforming loan balance, a 680 score, a 50% total ratio and its own six months of seasoning, which is the waiting period the lender wants after you buy or refinance. The higher-LTV lane is not offered in Texas, where a homestead cash-out is capped at 80% of the home’s value by the state constitution.
Here is the cost of this route, stated fairly. A cash-out refinance carries the closing costs of a full first-lien loan. You also give up your current mortgage, so what you replace it with matters. If your existing loan has terms worth protecting, this path puts them at risk. The CFPB says a cash-out refinance may be more or less expensive than a HELOC, depending on the terms. That neutral read holds up in practice.
One more caution. The new loan covers your whole balance plus the cash. The loan gets bigger and can take longer to pay off, even if you choose a similar term.
When a Home Equity Line Is the Better Fit
A line wins when your first mortgage is the best thing you own. Say the loan you hold has terms you could not replace today. A cash-out would throw that away to reach the cash. A second lien lets you borrow against the equity and leave the first loan untouched.
It also fits uneven needs. Think of a project paid in stages, tuition across several semesters, or a cushion you may or may not use. A line is revolving: you draw, repay and draw again during the draw period. According to the CFPB’s HELOC explainer, a draw period is followed by a repayment period, which is often ten or 20 years. You pay on what you use, not on the whole limit.
The costs and risks are different, not absent. HELOCs usually carry adjustable payments, so what you owe moves with your balance and with the market. Some lenders require minimum draws or balances. Some can reduce or freeze a line if the home’s value falls. That matters if you were counting on the line as a backstop. And like any loan secured by your home, falling behind could cost you the house.
There is also a thinner-equity problem. A line has to fit under the lender’s combined limit, and that limit is a lender policy, not a rule. If you are near 80% combined already, many lenders will not have much room to offer.
Running the Same Need Through Both
Percentages tell the story better than dollars. Picture a home worth 100 units. The table below uses made-up balances to show how each path stacks.
| Situation | Balance + cash need | Cash-out path | Line path |
|---|---|---|---|
| Moderate balance | 50% + 20% = 70% | Fits under the 80% cap | Combined 70%, depends on lender limit |
| Near the cap | 65% + 15% = 80% | Right at the standard cap | Combined 80%, depends on lender limit |
| Past the cap | 65% + 20% = 85% | Needs the higher-LTV lane | Only if the lender allows it |
In the first row, both options work on leverage, so the decision is about your first mortgage and the shape of your need. In the second, both sit right at the edge, and your credit, ratios and the property become the deciding factors. In the third, the standard cap stops the conventional cash-out. The wholesale lane to 89.99% may apply if you meet its conditions, including a primary residence, a conforming balance, a 680 score and a 50% ratio. A line at 85% combined is up to each lender.
The “past the cap” row is where people get confused. They assume a second lien stacks above the first-lien cap and slips past it. It does not stack for free. The combined number is what lenders watch, and a first-lien cap on a refinance does not leave room for a second lien on top.
Fannie Mae’s Selling Guide on limited cash-out refinances adds a related wrinkle. When new subordinate financing is taken together with a first-mortgage refinance, the deal counts as limited cash-out only if the first mortgage meets those criteria by itself. The practical takeaway: if you plan to refinance and add a line in the same breath, ask your loan officer how the pair will be classified.
Why a Rate-and-Term Refinance Is Not a Workaround
Some homeowners try to take cash out under a rate-and-term refinance, but that product does not work that way. A rate-and-term refinance, also called limited cash-out, pays off the existing first mortgage, the closing costs and any purchase-money second lien. It allows only incidental cash back. Fannie Mae’s limit is the lesser of 2% of the new loan amount or $2,000. Freddie Mac’s is the greater of 1% of the new loan amount or $2,000.
The leverage on a rate-and-term refinance is higher than on a cash-out, up to 95% on a one-unit primary residence. But it is for restructuring, not for pulling equity. Buying out a co-owner under a written agreement is one of the few transactions that stays in the limited cash-out category at both agencies.
Seasoning, Texas and Other Edges
A few edges change the answer before leverage even comes up.
- Seasoning on a cash-out. The first mortgage being paid off must be at least 12 months old, counted note date to note date. A borrower also needs six months on title. Delayed financing, inheritance and legal-award exceptions exist.
- Free and clear. A new loan on a home with no mortgage is still a cash-out refinance. Many owners assume it is something else.
- Texas. A cash-out on a homestead is capped at 80% of the home’s value by the state constitution. The higher-LTV wholesale lane is not written there. Some other states add their own rules too.
- Government loans. If you hold an FHA or VA loan and only want a lower payment structure, the FHA Streamline and the VA IRRRL are no-cash-out options. They are different tools for a different job.
- Second homes. A cash-out can be written on a second home, and occupancy sets the leverage. A conventional cash-out on a second home is limited to 75% LTV, below the 80% allowed on a one-unit primary residence.
Key Terms Defined
LTV (loan-to-value): The loan balance divided by the home’s value, shown as a percentage.
CLTV (combined loan-to-value): All loans secured by the home, added together and divided by its value.
Cash-out refinance: A new first mortgage that pays off the old one and pays you the difference.
HELOC (home equity line of credit): A revolving second lien you can draw on during a set draw period.
Seasoning: The waiting period a lender requires after you buy, refinance or take title.
Mortgage insurance: Coverage that protects the lender on high-LTV conventional loans. It can be cancelled at 80% of the original value and ends automatically at 78%.
A Balanced Verdict
Neither option is the better one in general. They solve different problems.
A cash-out refinance is a good fit when the first mortgage itself needs fixing, when you want a single lump sum, or when your equity need runs past what a line offers. The higher-LTV lane stretches that reach for borrowers whose files fit its narrow conditions. A home equity line is a good fit when you like the first mortgage, when your needs arrive in pieces, or when you want the option to borrow without committing to a bigger balance.
Run the combined number before you fall in love with either one. Add your first mortgage and the cash you want, divide by the home’s value, and see where it lands against 80%. That one step eliminates a lot of wishful thinking. Then compare the full terms on the Loan Estimate you receive, not a headline. The CFPB’s own conclusion that either can cost more or less is the honest starting point.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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 a second look at how a different property type changes the math, see Lendmire’s piece Jumbo Cash-Out vs Home Equity Line on a Vacation Home at the Cap.
Frequently Asked Questions
Does a home equity line let me borrow above the standard cap?
Only if that lender’s policy allows it. A line has no program-wide cap, so each lender sets its own combined limit. It counts your first mortgage plus the full credit limit against the home’s value. Some lenders stop near the standard cap, and others go beyond it for strong files.
What does the higher-LTV cash-out lane require?
Across the wholesale programs Lendmire works with, the lane reaches 89.99% on a thirty-year fixed with no mortgage insurance. It carries its own six months of seasoning. It is not written in Texas, and everything is subject to lender guidelines and full file review.
Will a cash-out refinance replace my current mortgage terms?
Yes. The new first mortgage pays off the old one, so its terms disappear. If the loan you hold has features worth keeping, a line may suit you better. Compare the new loan’s full terms against your current ones before you decide.
Can I add a line after a cash-out sitting at the cap?
It depends on the line’s lender. Your combined debt already sits at the ceiling, so many lenders will have little or no room to offer. If you expect to want both, plan the combined number up front.
Is my interest deductible?
Tax treatment can depend on your situation. Speak with a qualified tax professional before relying on any deduction or credit.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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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. HUD Mortgagee Letter 2019-11
2. VA Purchase and Cash-Out Loans
3. The CFPB
5. Fannie Mae Selling Guide: Limited Cash-Out Refinance Transactions (B2-1.3-02)
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 Cash Comes Out of a Cash-Out Refinance on Your Home? · Cash-Out Refinance vs Home Equity Loan When Child Support Counts as Income
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.