The Quick Read: On a one-unit second home, a conventional cash-out refinance tops out at 75% of the appraised value. That cap limits the total new loan, not the cash you receive. The new loan must first pay off your existing mortgage, any other liens, and any closing costs you finance. What remains is your cash. A principal residence reaches 80%, so a second home carries a lower ceiling. Every figure here is subject to lender guidelines and full file review.
What Does the 75% Cap Actually Mean?
The 75% cap is a ceiling on the new loan as a share of appraised value. It is not a share of your equity. At 75%, you must keep at least 25% of the home’s value as equity after the refinance, before any financed costs.
Here is the formula in one line: appraised value × 75% − existing mortgage payoff − other liens − financed closing costs = cash to you.
Picture a second home that appraises at some value. The lender multiplies that value by 75%. That is the most the new loan can be. Then the lender subtracts what you still owe on the first mortgage. Any second lien comes out next. Financed closing costs come out last. The remainder is yours.
If the subtraction leaves nothing, the loan is not a cash-out at all. It may still work as a different transaction, but you walk away with no cash.
Why the lower cap on a second home? Lenders treat a second home as a bigger risk than the place you live. When money gets tight, borrowers protect the primary residence first. The cap builds in extra equity to cover that risk. That is the logic of the rules, and it is why the number moves with occupancy.
How Do the Caps Compare by Occupancy?
The cap changes with how you use the property. Across the wholesale conventional programs I place files with, the cash-out leverage limits are the same two figures. One is for your main home. The other covers everything else.
| Property use | Max LTV, cash-out refinance |
|---|---|
| One-unit principal residence | 80% |
| Two- to four-unit principal residence | 75% |
| Second home | 75% |
| Investment property | 75% |
Compare that with a second-home purchase, where leverage runs up to 90%. The two numbers answer different questions. The 90% figure belongs to buying the home. It does not describe pulling cash out of it. Fannie Mae’s Eligibility Matrix lays out this split by occupancy and transaction type. It shows 75% for a one-unit second-home cash-out, against 90% for a second-home purchase or limited cash-out refinance. The matrix is revised periodically, so the current edition is what governs a live file.
If your second home is a rental in disguise, the classification changes. That is a different loan, outside this article. Occupancy decides the leverage, and the lender settles occupancy before anything else.
What Counts as a Second Home?
A second home is a one-unit property you occupy for part of the year and keep available for your own use. Fannie Mae’s occupancy rules set several tests:
- You occupy it for some portion of the year.
- It is a one-unit dwelling.
- It is suitable for year-round occupancy.
- You have exclusive control over it.
- It is not a timeshare or a rental property.
- No agreement gives a management firm control over its occupancy.
Two points trip people up. First, there is no “second home” category for a two- to four-unit building under these rules. Multi-unit cash-out loans fall under other occupancies. Second, a rental pool or a revenue-sharing arrangement will disqualify the property as a second home.
Occasional rental income does not automatically break the classification. But the loan has to qualify without counting that income. If you need the rent to make the numbers work, the property is not being treated as a second home.
Second homes also go through automated underwriting. The file needs an Approve/Eligible finding from Fannie Mae’s Desktop Underwriter. Manual underwriting is not the usual path here.
How Is the Loan Underwritten, Step by Step?
Underwriting a second-home cash-out follows a fixed order. Here is how a file moves.
1. Classify the occupancy. The lender confirms the property meets the second-home definition. A misclassified file gets re-cut under investment rules, with a different cap.
2. Check the ownership clock. At least one borrower must have been on title for six months. The first mortgage being paid off must be at least 12 months old, measured note date to note date. Fannie Mae’s cash-out refinance guidance sets the 12-month age.
3. Order the appraisal. The appraised value is the base of every calculation. The loan is capped by value, not by what you paid or what you spent on upgrades. Appraisals are not negotiable the way a purchase price can be.
4. Underwrite credit, income and reserves. The wholesale conventional programs I work with start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. Reserves can come into play on cash-out loans, especially when the ratio runs high. Matrix notes tie reserves to cash-out files when the automated debt-to-income figure runs above 45%. Waiting periods after a credit event are agency rules: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Shorter periods may apply with documented extenuating circumstances.
5. Settle the rental-income question. If the home earns rent, the loan can stay a second-home loan only if that rent is not used to qualify.
6. Close and disburse. Proceeds go first to the old mortgage, other liens and costs. The remainder goes to you. Pricing for cash-out loans includes loan-level adjustments from the agencies. Those adjustments are built into your terms, and your Loan Estimate shows what applies to your file.
A Worked Example Without Dollar Figures
Run the numbers on a second home with no other liens. Assume the home appraises at a value we will call 100 units. The cap is 75, so the new loan can reach 75 units. Say your existing mortgage balance is 40 units. The gap is 35 units. Financed closing costs take a small slice. Your cash is the 35 units, less those costs.
Now add a home equity loan of 10 units. The same 75-unit cap applies. But now the payoff is 40 plus 10, or 50 units. The gap shrinks to 25 units, less costs. A second lien cuts your cash one for one.
Now let the appraisal come in 5% lower. The home is now 95 units. The cap becomes 71.25 units. Your payoff stays at 40. The gap falls to about 31 units. A 5% miss on value cost you roughly 11% of your cash. That is the appraisal-sensitivity effect. Cash is a thin remainder, so small swings in value hit it hard.
These are modeled percentages, not market figures. Your own result depends on your balance, your liens and the appraisal.
Which Limit Binds First?
The 75% cap is one limit among several. Whichever one is tightest sets your ceiling.
| Limit | When it bites |
|---|---|
| Value cap (75%) | Most second-home files with real equity |
| Conforming loan size | Larger balances, where jumbo lanes take over |
| Credit and ratios | Scores near the floor or ratios near 50% |
| Seasoning | Recent purchase or a recent refinance |
On many files the value cap decides. On others, a high ratio or a young loan binds first. That is why a lender can approve less than the cap implies. The cap is a ceiling, not a promise.
Where the General Rule Breaks
A few cases bend the usual answer. None of them lifts the 75% cap, which stays put.
Delayed financing. You bought the second home with cash and want money back out soon after. Delayed financing waives the six-month title wait. Conditions include an arm’s-length purchase and documented source of funds. The leverage cap does not change. You still face 75%, plus the appraisal and full underwriting. Delayed financing does not let you borrow more. It only lets you borrow sooner.
Limited cash-out versus true cash-out. The 90% figure applies to purchases and limited cash-out refinances. Take more than incidental cash back and the loan moves into the 75% bucket. A limited cash-out pays off the existing first mortgage and closing costs, with only incidental cash to you. It is a different transaction from the one here.
Manufactured housing. Manufactured homes follow their own product matrix. The layout for cash-out is hard to read, so check the current program with a loan officer before assuming anything.
Condo second homes. Project rules matter. Any waivers that exist for limited cash-out do not carry over to true cash-out. Confirm against the Selling Guide.
Ineligible structures. A temporary interest-rate buydown makes a loan ineligible as a cash-out. So do certain PACE-lien situations. Check current guide language before relying on these.
Free-and-clear second homes. If you own the home outright, a new loan against it still counts as cash-out. There is no old mortgage to pay off, so the full loan amount, less costs, comes to you. The 75% cap still applies.
If you want the program-level view of how the pieces fit, Lendmire’s cash-out refinance programs page covers it. And for the paid-off case in more depth, see Lendmire’s article How Much a Cash-Out Refinance Lends on a Paid-Off Second Home.
Should You Take the Maximum?
The most you can borrow is rarely the right amount. A cash-out replaces your old mortgage with a larger one. Your monthly payment may rise, and the term may reset. Each of those changes should be weighed against what the cash does for you.
The pull on a second home is that the lien sits on a property you do not live in. Losing a vacation home is different from losing your main home, but it is still a loss, and the debt still has to be paid. Federal research from the Consumer Financial Protection Bureau found that paying off other bills or debts was the most common reason borrowers took cash out in the survey years it studied. The same research warns that swapping non-mortgage debt for mortgage debt can raise foreclosure risk. Credit card debt does not put a lien on your home. Mortgage debt does.
Some practical questions to ask before you borrow the maximum:
- What will the cash do, and does it earn or save more than it costs?
- How will the payment change, and does the budget hold if income dips?
- Are you comfortable with a larger balance on a home you use only part of the year?
- Would keeping your current loan and borrowing less be enough?
Costs matter too. A “no-cost” refinance still has costs. They are built into the rate or the balance. Your Loan Estimate shows how each version compares, so compare the whole package, not one number.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Loan-to-value (LTV): The new loan amount divided by the appraised value of the home, shown as a percentage.
Cash-out refinance: A new, larger mortgage that pays off the old one and gives you the difference in cash.
Limited cash-out refinance: A refinance that pays off the existing loan and costs, with only incidental cash back to you. Lenders also call it a rate-and-term refinance.
Second home: A one-unit property you occupy part of the year, with exclusive control, that is not a rental or timeshare.
Seasoning: The waiting period before a loan or ownership counts for a new transaction, such as 12 months on the mortgage being paid off.
Delayed financing: An exception that lets a cash buyer take out a cash-out loan without the usual six-month title wait.
Subordinate lien: A loan secured by the home that ranks behind the first mortgage, such as a home equity loan.
Frequently Asked Questions
Is the 75% cap the same as 75% of my equity?
No. It is 75% of the home’s appraised value, and it limits the total new loan. You must keep at least 25% of the value as equity. Your cash is what remains after the old mortgage, other liens and financed costs come out of that loan amount.
Can I get 90% on my second home through a cash-out?
No. The 90% figure applies to second-home purchases and limited cash-out refinances. True cash-out is capped at 75%. Take more than incidental cash back and the loan moves into the lower bucket.
Does delayed financing let me borrow more on a cash purchase?
No. It only removes the six-month wait on title. The leverage cap, the appraisal and the full underwriting still apply. It helps you move sooner, not borrow more.
Does a recent refinance block a new cash-out?
Often, yes. A borrower generally must have been on title for six months, with named exceptions such as inheritance and legal awards.
What if I rent the home out part of the year?
It can remain a second home, but only if the rent is not used to qualify and no rental pool or management firm controls its occupancy. If you need the rent to qualify, the lender treats the property as an investment, which changes the rules.
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 broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide B2-1.1-01, Occupancy Types
3. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
4. Consumer Financial Protection Bureau
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: How Much Cash a Conventional Cash-Out Releases on a 2-4 Unit Home · Conventional Cash-Out Refinance Requirements on a 2-4 Unit Primary Home · Can You Get a Conventional Cash-Out Refinance on a Vacation Home?
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.