The Quick Read: It depends on the new loan amount, and there is no fixed figure. Your cash is the new loan, minus the note payoff, minus closing costs rolled into the loan, minus any other payoffs. The ceiling is set by leverage: on a one-unit primary residence, the conventional cash-out programs we place files with go to 80% of appraised value, subject to lender guidelines and full file review. If the note payoff eats most of that room, little or no cash comes back.
What Is the Formula for Cash Back?
The formula is one line: new loan amount, minus note payoff, minus costs financed into the loan, minus other payoffs, equals cash to you. The maximum new loan is appraised value times the leverage limit. Everything else comes out of that number.
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.
A home with no mortgage is not a plain refinance. A cash-out refinance either pays off existing mortgages with a new first mortgage on the same property, or is a new mortgage on a property that has no mortgage lien against it. A free-and-clear home that takes a new first mortgage is therefore written as a cash-out refinance.
Here is the part most borrowers miss. The note you are repaying does not reduce the loan limit. It reduces your check. The lender sizes the loan against value, then the title company pays the note holder out of the proceeds. Whatever is left is yours.
Run it in percentages. Say the home appraises at 100% of value and the program allows 80%. The new loan is 80% of value. If the note payoff is 30% of value and costs financed into the loan run 3%, you walk away with about 47% of value in cash. If the payoff and the financed costs together equal 80% of value, you walk away with nothing, and any costs beyond that would have to be paid from your own funds at closing.
Why Does the Note Not Make the Home “Not Paid Off”?
A private or family note usually does not change the cash-out classification if no recorded mortgage sits on the home. If the note is secured by a recorded lien, the payoff must clear title first. If it is unsecured, a payoff letter and proof of the debt are what the file needs.
Either way, the new first mortgage is a cash-out refinance. The note is simply one of the uses of the money. Lenders do not restrict what you do with cash-out proceeds, which is why a repaid note and a paid credit card look identical on the closing statement.
One exception to watch is a purchase-money lien. Fannie Mae’s limited cash-out page says only subordinate liens used to purchase the property may be paid off in that category. The limited cash-out route is built around paying off an existing first mortgage, closing costs and a purchase-money second lien, with only incidental cash back. A repaid note that financed something other than the purchase does not fit that description, so the loan is written as a cash-out refinance at the lower cash-out leverage.
How Does the Closing Waterfall Work?
Money moves in a set order at closing: the new loan funds, then the title company pays off the note and any liens, then costs and prepaids, then the remainder goes to you. If the first items equal the loan, you receive nothing.
| Step | What happens | Effect on your cash |
|---|---|---|
| 1. New loan funds | Sized to value and leverage | Sets the ceiling |
| 2. Note payoff | Per payoff letter, with per-diem interest | Largest deduction |
| 3. Other payoffs | Liens, judgments, tax items | Reduces cash |
| 4. Closing costs | Title, appraisal, financed costs | Reduces cash |
| 5. Prepaids and escrows | Taxes, insurance setup | Reduces cash |
| 6. Remainder | Wired or checked to you | Your net cash |
Three outcomes are possible. Cash returned: the loan covers everything with room to spare. Zero cash: the loan roughly equals payoff plus costs. Cash owed: the payoff plus costs exceeds the loan, and you would need to bring funds to closing, or the deal does not work.
What Note Charges Shrink Your Proceeds?
Four items hide inside a payoff letter: accrued interest through the closing date, a daily per-diem if closing slips, any prepayment penalty or exit fee written into the note, and any late charges. Ask the note holder for a written payoff letter with a per-diem figure and a good-through date. Estimates from memory do not work.
A short checklist for the file:
- A signed payoff letter from the note holder, with per-diem.
- The original note, and the recorded lien documents if secured.
- A release of the lien, or a commitment to deliver it at funding.
- Proof the debt exists for an unsecured or family note.
- Wire instructions the title company can verify by phone.
If the payoff letter is stale or the release is not committed, title cannot clear and the file stalls. Request the letter early and ask for a fresh one if closing moves. Lenders also review a lien release the same way they review a payoff: no release, no clean first-lien position.
Who Can Qualify, and What Limits the Amount?
Qualification is the same as any full-documentation conventional refinance. The wholesale conventional programs start at a 620 decision score, the automated finding governs most files, and the total ratio ceiling is 50%. Manually underwritten loans run tighter, at 36% or 45%, with the reserve and score factors of the Eligibility Matrix.
A paid-off home has no mortgage payment today. The new loan creates one, and it has to fit your income and debts. That is the real limit for many borrowers, more than the equity itself. The CFPB’s home equity guide notes lenders typically require you to keep at least 10% to 20% of your home value as equity, which matches the 80% ceiling on a primary residence.
Reserves can apply too. The Fannie Mae Eligibility Matrix notes minimum reserves on automated casefiles with a total ratio above 45%. Documented reserves belong in the file before submission, not after a condition arrives.
Occupancy matters for leverage. One-unit primary residences reach 80%. Two- to four-unit primary residences, second homes and investment property are written at 75%. Texas homestead cash-outs are capped at 80% of value by the state constitution.
What About Seasoning and Recent Purchases?
Two clocks apply. A borrower must be on title for six months, and a first mortgage being paid off must be at least 12 months old, note date to note date. On a paid-off home, the title clock is the one that matters.
Exceptions exist. Delayed financing lets a recent all-cash buyer refinance inside the six-month window, documented with the settlement statement showing no financing was used. Inheritance and legal awards are also recognized. Delayed financing is tied to the documented purchase basis, not a fresh appraised value, so the cash back on those files is smaller than the equity might suggest.
A wholesale lane also reaches 89.99% leverage with no mortgage insurance for a 680 score and a 50% ratio on a thirty-year fixed, primary residence, conforming balance. It carries its own six months of seasoning. It is the one exception to the rule that mortgage insurance applies above 80%, and it is not written in Texas. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Can a Streamline Pull Cash Out of a Paid-Off Home?
No. Both government streamlines require an existing government loan, and you have none.
The HUD page says the mortgage being refinanced must already be FHA insured and current, and cash back is held to a small cap. The VA’s IRRRL is a VA-to-VA rate and payment reduction, not an equity tool. VA cash-out is a separate product with its own rules. For a paid-off home with no VA or FHA history, the conventional cash-out is the usual route.
Land contracts are a special case. If your “note” is an installment land contract, Fannie Mae treats a payoff of a contract under 12 months old as purchase-money. Check how your contract is classified before you plan around the proceeds.
Cash-Out Refinance or Another Equity Product?
A home equity loan or line is a second mortgage, and on a paid-off home it becomes the first lien. The tradeoff is cost structure and flexibility versus a single new first mortgage.
| Factor | Cash-out refinance | Home equity loan or line |
|---|---|---|
| Lien position | New first mortgage | New lien, first on a paid-off home |
| Note payoff | Paid at closing from proceeds | Paid from the funds drawn |
| Leverage on primary residence | Up to 80% | Set by the individual lender |
| Underwriting | Full documentation | Varies by lender |
The CFPB defines it simply: you replace your existing mortgage with a bigger one and take the difference in cash, and closing costs are often payable. For a homeowner repaying one large note, one new loan with one payment is easier to track. For a borrower who only needs a small amount, a smaller product may leave more equity untouched.
For the practical side of putting those proceeds to work, Lendmire’s cash-out refinance programs page lays out the program options.
How Much Should You Actually Borrow?
Borrow what clears the note and costs, with a cushion. Not the maximum.
Moving a private note onto the house changes the debt. A low-cost or family note may carry little pressure. A mortgage carries foreclosure risk, escrow requirements and a payment tied to your income. Every dollar taken beyond what you need is repaid with interest. The CFPB warns that converting equity into cash creates debt you have to repay.
A simple test: price the downside. If the appraisal comes in light, the 80% ceiling shrinks and your cash shrinks with it. Run the note payoff against a value 5% to 10% below your hope. If the file still works, it is sturdy. If it only works at the top number, it is fragile.
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
Payoff letter: a written statement from the note holder giving the exact amount owed through a stated date.
Net proceeds: the cash that reaches you after the payoff, costs and other deductions.
Cash-out refinance: a new first mortgage that replaces existing debt or sits on a free-and-clear home and returns cash.
Free and clear: a home with no recorded mortgage lien against it.
Lien release: the recorded document showing a secured debt is satisfied.
Frequently Asked Questions
Is a home with only a private note really paid off?
It depends on whether the note is secured. If a lien is recorded, title must clear it at closing. If the note is unsecured, the home has no lien, and the new loan is still cash-out. Either way the payoff comes out of your proceeds.
Can the cash back be zero?
Yes. When the note payoff plus costs equals the new loan, no cash returns. If they exceed it, the file does not work without bringing funds. The leverage ceiling, not your need, sets the limit.
Does a bigger home value mean more cash?
Generally yes, because the loan limit is a percentage of appraised value. A light appraisal lowers the limit and your cash with it. Lender guidelines and full file review control the final figure.
Can I use an FHA Streamline or VA IRRRL instead?
No. Both need an existing FHA or VA loan to refinance. A paid-off home has none, so a conventional or other cash-out product applies.
Do closing costs reduce my cash?
Yes, when they are rolled into the loan or paid from proceeds. Rolling them in does not by itself change the loan type, but it lowers what you net.
Next Step
If you are weighing a cash-out refinance on a home you own outright, Lendmire can help you compare the programs and the equity each one reaches.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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.
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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. Fannie Mae Selling Guide B2-1.3-02, limited cash-out refinance
3. Fannie Mae Eligibility Matrix
4. HUD FHA Streamline Refinance
5. VA-to-VA rate and payment reduction
6. Fannie Mae Selling Guide B2-1.3-05, installment land contract payoff
7. CFPB Ask: similar loans to a HELOC
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 Based on Property Type? · How Much Cash Comes Out of a Cash-Out Refinance Without an Appraisal on the New Loan? · How Much Cash Comes Out of a Cash-Out Refinance on a Fourplex?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.