The Quick Read: The size of your loan is set by your home’s appraised value, not by your credit score. On a one-unit primary home, the new loan tops out at 80% of value. Credit decides whether you qualify and what the loan costs. Your cash is what is left after the old mortgage, other liens and closing costs come out.
Here is the formula: appraised value × maximum LTV = the largest new loan. Then subtract what you owe and what the deal costs. What remains is your check.
Key Takeaways
- The cap comes from occupancy and unit count. Credit does not step it up or down.
- A one-unit primary home reaches 80% LTV. Two- to four-unit homes, second homes and investment property top out at 75%.
- Credit moves two things: whether the file gets approved, and what the loan costs.
- Your cash is never simply “cap minus balance.” Costs, prepaids and other liens come out first.
- The appraisal is the swing factor. A lower value shrinks your check fast. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
What a Cash-Out Refinance Actually Does
A cash-out refinance replaces your current first mortgage with a bigger one. The new loan pays off the old one, covers closing costs, and sends you the difference. You then have one loan, one payment, and a larger balance.
The CFPB’s guide to using home equity makes a point worth repeating. A cash-out can stretch out your payoff time, and the payment may rise because a bigger loan replaces the one you have. It also says no home-equity option turns 100% of your equity into cash.
This differs from a HELOC or home equity loan. Those sit on top of your first mortgage and give you a second payment. Lendmire’s cash-out refinance programs fall in the first group. They replace the loan you have.
Why Credit Does Not Set the Cap
Many borrowers expect a ladder: higher score, higher percentage. That is not how the conforming guidelines work. The Fannie Mae Eligibility Matrix sets maximum LTV by occupancy and unit count. Freddie Mac’s Guide Section 4203.1 does the same.
Some lender web pages show tidy tiers, like one percentage for 740 and another for 680. Those are one lender’s choices, not agency rules. Across the wholesale programs Lendmire places files with, a 700 score and a 640 score face the same cap on the same home. Lender overlays, the extra rules a lender adds on top, are the one exception. They vary by lender.
So what does credit do? Three things.
1. It decides approval. The wholesale conventional programs start at a 620 decision score. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review. The automated underwriting finding governs most files.
2. It drives pricing. Fannie Mae applies loan-level price adjustments to cash-out loans, based on credit score and LTV. They stack on top of each other. Lower scores and higher LTVs cost more, and the cost can show up as a higher rate or a closing cost. The LLPA matrix has a separate grid for cash-out.
3. It changes the file’s other requirements. A weaker score can mean reserves, a tighter debt ratio, or a manual review.
One more detail. Fannie Mae dropped its own hard 620 minimum for loans run through its automated system, which now weighs overall risk. A sub-620 file can still be stopped by the credit problems behind the score. The wholesale floor stays at 620 for the programs described here.
The Equity Tiers: How Much Room You Have
Equity is what your home is worth minus every lien on it. The cap limits total debt, not the share of equity you can pull. That is why “I can take 80% of my equity” is a myth. At an 80% cap, you keep at least 20% of the home’s value as equity.
Here is the room you have before costs, as a share of appraised value, on a one-unit primary home at the 80% cap:
| You owe (% of value) | Room under the cap | Reality check |
|---|---|---|
| 75% | 5 points | Rarely worth the costs |
| 60% | 20 points | Workable |
| 40% | 40 points | Strong cushion |
| 80% or more | None | No cash-out |
On a two- to four-unit primary home, the cap is 75%. Someone owing 60% has 15 points of room, not 20. Every dollar of costs comes out of that room.
Credit Tier × Equity Tier on One Home
Picture the same home, appraised at 100% of its expected value. Change only the credit score and the debt owed. This table shows what each combination does on a one-unit primary home. Credit changes the path, not the cap.
| Credit situation | Cap on loan | What changes |
|---|---|---|
| Below 620 | Not eligible | Wholesale floor not met |
| 620 to 679 | 80% | Pricing steps up; closer review |
| 680 and up | 80%, or higher in one lane | Access to the 89.99% lane |
| Any score, owe 80%+ | 80% | No room to take cash |
A caution: those rows describe typical program mechanics. Subject to lender guidelines and full file review, a given file can land differently.
Four Borrower Pictures on the Same Home
Run the same 100-point home through four situations. These use percentages of value, not dollars, and are modeled assumptions.
Thin equity. You owe 75%. The cap leaves 5 points. Closing costs and prepaids can eat most of that. Skip it.
Mid equity. You owe 60%. The cap leaves 20 points. Costs reduce it, and you keep the rest as cash. This is the profile cash-out refinances are built for.
Deep equity. You owe 40%. You have up to 40 points of room. Few people need that much, and a bigger loan carries a bigger payment. Borrow what the purpose requires.
Second lien in the picture. You owe 50% on the first mortgage and 15% on a home equity loan. The new first loan must pay off both. Room is 15 points before costs. Lenders count all debt on the home against the limit, not only the first mortgage.
What Shrinks Your Check
The cap is a ceiling. Several things pull the real number below it.
The appraisal. It sets the denominator for every ratio. Say you owe 70% of what you expect the home to be worth. The home appraises 5% lower. Your debt is now about 73.7% of the new value, and the 80% cap shrinks too. Room drops from 10 points of the expected value to about 6. A modest miss takes a visible bite.
Payoffs and costs. The new loan pays off the first mortgage, any subordinate liens and closing costs, points and prepaids. Fannie Mae’s cash-out rules list these as acceptable uses of the new loan, along with taking equity out for any purpose. All of them reduce your proceeds.
Debt-to-income ratio. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans use 36% or 45%, with reserve and score factors from the Eligibility Matrix. Reserves, the cash left in the bank after closing, can be required on some cash-out files.
Seasoning. The mortgage being paid off must be at least 12 months old, counted from note date to note date. At least one borrower must also have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards.
Loan limits. If the cap-based amount exceeds the conforming limit, you are in jumbo territory.
Freddie Mac measures leverage three ways. LTV is the first mortgage over value. TLTV adds secondary financing that has been drawn. HTLTV adds the full HELOC credit limit, drawn or not. A HELOC you barely touch can still count against you under that measure.
Where the 80% Rule Breaks
Rules of thumb fail at the edges. These are the cases that surprise people.
The no-mortgage-insurance lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance. It carries its own six months of seasoning. It is a program lane, not an agency standard, and it is not written in Texas. Subject to lender guidelines and full file review.
Rate-and-term (limited cash-out). This is a different transaction. The new loan pays off the existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. It reaches 95% LTV on a one-unit primary home. It reaches 97% where the existing loan is agency-owned and the first-time-buyer program allows. Mortgage insurance applies above 80%. If a HELOC is paid off in the deal, the loan becomes a full cash-out, with the lower cap. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Delayed financing. A borrower who bought with cash can take cash out inside the usual seasoning window. The new loan cannot exceed the documented initial investment plus costs, prepaids and points. The cash-out LTV caps still apply, and the original purchase must be an arm’s-length deal.
Student loan cash-out. The pricing add-on is waived when the requirements are met. The standard LTV caps still apply.
Manufactured homes and land trusts. These carry lower caps than a standard one-unit home.
A non-occupant co-borrower. Using their income can trigger lower caps.
Texas homestead. State law limits a cash-out on the homestead to the agency figure.
Second homes and investment property. Occupancy decides the leverage, and these sit at 75% for cash-out. That is all this article covers about them.
Government programs. FHA and VA have their own cash-out rules and are outside this piece.
Some features are ineligible on a cash-out, such as a temporary rate buydown. Check the current guide for the full list.
Is a Small Cash-Out Worth It?
Not always. A loan that pays off the old mortgage and costs money to close has to deliver a real use for the cash. If room is only a few points of value, costs can swallow it. You would have swapped your existing loan for a new one, with little to show for it.
Think through four questions first. What is the cash for? Would a smaller loan serve? Does the new payment fit your budget with room to spare? And does the new loan replace a loan you would rather keep?
The CFPB’s research on cash-out borrowers found that paying off other debts was the most common reason. The agency also says that paying non-mortgage debt with mortgage debt can raise foreclosure risk, since unpaid credit cards become debt against your home. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Find Your Own Tier in Five Steps
1. Estimate value. Use a realistic number. The appraisal decides the real one.
2. Add up every lien. Include the first mortgage, any second, and any HELOC.
3. Divide total debt by value. Compare it to your cap: 80% on a one-unit primary home, 75% on two to four units.
4. Check your gates. Credit decision score, debt ratio, 12 months on the old loan, 6 months on title.
5. Subtract costs. Closing costs, points and prepaids come out of whatever room is left.
If the number that survives is thin, the better move may be keeping the loan you have.
Key Terms Defined
LTV (loan-to-value): The loan balance divided by the home’s appraised value, shown as a percentage.
Equity: What the home is worth minus all liens against it.
Seasoning: The waiting period a lender or agency requires before a loan or ownership counts for a cash-out.
LLPA (loan-level price adjustment): A price add-on based on credit score and LTV, which can show up as a higher rate or a closing cost.
Limited cash-out refinance: A refinance that pays off the existing loan and costs, with only small cash back.
Reserves: Cash or liquid assets left after closing, which some files must show.
Conforming loan limit: The largest loan the agencies will buy. Above it, jumbo programs take over.
Frequently Asked Questions
Does a higher credit score let me borrow a bigger percentage of my home’s value?
Not under the conforming guidelines. The cap is 80% LTV on a one-unit primary home regardless of score. A higher score improves approval odds and lowers the cost. One wholesale lane reaches 89.99% with no mortgage insurance, but it needs a 680 score and other conditions. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Can I take out all of my equity?
No. At an 80% cap, you keep at least 20% of the home’s value in equity. The CFPB also states that no home-equity option converts 100% of equity into cash. Costs and payoffs reduce your check further.
How long must I own the home first?
Typically one borrower must be on title for 6 months, and the mortgage being paid off must be at least 12 months old. A lender reviews the exact facts.
Is a cash-out the same as a rate-and-term refinance?
No. A rate-and-term refinance gives only incidental cash back and reaches 95% LTV on a one-unit primary home, or 97% in the agency-owned, first-time-buyer case. A cash-out reaches 80%. Paying off a HELOC in the deal makes the loan a cash-out. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
What if my appraisal comes in low?
The cap applies to the lower value, so your room shrinks. A 5% miss can cut the room by a third or more if your equity is thin. Larger equity gives more cushion.
What to Do Next
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. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
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.
For the program’s current guidelines, see conventional loan programs.
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References
1. CFPB, Using Home Equity guide
2. Fannie Mae Eligibility Matrix
3. Freddie Mac Guide Section 4203.1
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. CFPB: CFPB Cash Out Refinances and Paydown Behavior of Non Mortgage Debt Balances
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: Conventional Cash-Out Seasoning Rules and When Exceptions Apply · Conventional Cash-Out Refinance Definition for a Primary Home · Conventional Cash-Out Refinance Credit Requirements by Occupancy and LTV
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.