The Quick Read: It depends on your equity. On a one-unit primary residence, the cash is what remains of 80% of the appraised value after your current loan, any other liens and closing costs come out. Two- to four-unit principal residences, second homes and investment property are capped at 75%. A rate-and-term refinance returns only incidental cash, so it will not fund a down payment.
How Is the Cash Actually Calculated?
The cash equals your home’s appraised value times the program’s cap, minus everything already owed against the home, minus closing costs. The cap covers all liens combined, not just the new loan. That is why “80%” never means you walk away with 80% of your home’s value.
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.
The cap is a loan-to-value (LTV) limit: the most the lender allows against the appraised value, shown as a percentage. For a conventional cash-out refinance on a one-unit principal residence, that limit is 80%. For two- to four-unit principal residences, second homes and investment property, it is 75%. Occupancy sets the leverage.
Here is the sequence, in plain order:
| Step | What happens |
|---|---|
| Appraised value | Sets the starting number |
| Times the cap | 80% on a one-unit primary home |
| Minus current first mortgage | Paid off at closing |
| Minus other liens | HELOCs and second mortgages |
| Minus closing costs | Come out of the proceeds |
| Equals net cash | What reaches your account |
The appraisal matters more than most owners expect. A lower value shrinks the cap, and the cash shrinks with it. Closing costs vary by file and appear on your Loan Estimate, so they are worth reading line by line.
Texas works differently. A cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution, whatever the program allows elsewhere, and that cap counts all liens combined.
Some borrowers reach further. Across the wholesale programs a broker like Lendmire arranges, one lane goes to 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed loan, a primary residence, a conforming balance and its own six months of seasoning. Because of the Texas homestead cap, this lane is not written on a Texas homestead. Everything here is subject to lender guidelines and full file review, and you can see how the product is laid out on Lendmire’s cash-out refinance programs page.
What Do Three Equity Levels Look Like?
Run the numbers on three modeled homeowners, each with a one-unit primary residence at the 80% cap. These are percentages of appraised value, not market data.
- Low balance: The current mortgage equals 40% of value. Room under the cap is 40% of value, before costs.
- Middle balance: The mortgage equals 60% of value. Room under the cap is 20% of value.
- High balance: The mortgage equals 75% of value. Room is 5% of value, and closing costs may take a large share of it.
Same home, same cap, very different results. The third owner gets a bigger loan and a reset balance for a thin slice of cash. Not a good trade for most people.
Now change the property type. If the first owner’s home were a duplex, the cap drops to 75%. Room under it falls from 40% of value to 35%. Five points of value disappear before anyone looks at costs.
The cap table that Fannie Mae publishes in its Eligibility Matrix breaks out the cash-out limits by occupancy and unit count. Lenders working to that matrix start from those limits.
Start From the Down Payment You Need
Work backward. Begin with the down payment on the new home, add the purchase closing costs, then size the cash-out to cover them. Borrowing only what you need keeps the old home’s balance lower.
The purchase side has its own percentages. On conventional programs, a one-unit principal residence can go to 97% LTV, a 3% down payment, with a fixed rate when at least one borrower is a first-time buyer. Otherwise it goes to 95% LTV, or 5% down. Second homes go to 90%, which means 10% down. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Those percentages apply to the new home’s price. If the new home costs about what the old one is worth, the math is simple. A 5% down payment needs a net cash-out of roughly 5% of the old home’s value, plus purchase closing costs and a cushion. If the new home costs more, the need rises in proportion. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
A short sizing checklist:
1. Pick the down payment percentage for the program you expect to use on the new home.
2. Add the purchase closing costs and the cash you want to keep after closing.
3. Compare that total with the net cash from the table above, using your own balance and a realistic appraised value.
4. Leave a cushion in case the appraisal comes in lower than hoped.
Run it before you make an offer. Sellers don’t wait while you sort out equity.
Will the Purchase Lender Accept Borrowed Equity?
Yes, when the cash-out is fully documented. Fannie Mae’s guide treats borrowed funds secured by an asset as an acceptable source for a down payment, closing costs and reserves, because the money is a return of your own equity. Its trending FAQ page lists a HELOC on another property as an example of a documented source.
Documentation is the whole game. The purchase lender wants to see the terms of the secured loan, proof that the lender on it is not a party to the sale, and proof that the funds reached you. In practice that means the cash-out closing disclosure, bank statements showing the deposit, and the purchase contract.
Hidden borrowing is the real problem. A personal loan disguised as a gift is misrepresentation, and lenders treat it that way. Equity you borrowed against your own home, shown on paper, is a normal file.
Which Refinances Can’t Hand You Cash?
Only a full cash-out refinance returns meaningful cash. The look-alikes below are built for other jobs.
| Refinance | Meaningful cash back? | Built for |
|---|---|---|
| Conventional cash-out | Yes | Taking equity out |
| Rate-and-term (limited cash-out) | No, incidental only | Changing loan terms |
| FHA Streamline | No | Existing FHA loans |
| VA IRRRL | No | Existing VA loans |
| VA cash-out | Yes | Equity on a VA-eligible home |
A rate-and-term refinance pays off your first mortgage, your closing costs and any purchase-money second lien. It reaches 95% LTV on a one-unit principal residence, or 97% where the existing loan is agency-owned and the first-time-buyer program allows. The cash back is small by design. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000. Freddie Mac’s limit is the greater of 1% of the new loan amount or $2,000, a figure that comes from the agency’s own guidelines and is subject to lender review. Fannie Mae’s limited cash-out guideline also explains that paying off a second lien keeps the loan “limited” only if that lien funded the purchase. Otherwise it becomes a full cash-out. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The government streamlines are narrower still. The FHA Streamline replaces an existing FHA loan with limited credit review, no appraisal and a net tangible benefit test. The VA IRRRL replaces an existing VA loan with a 0.5% funding fee unless you are exempt, no VA appraisal and the same net tangible benefit test. Neither one is an equity tool.
VA does have a true cash-out. VA’s cash-out loan page says you need a Certificate of Eligibility, must live in the home you are refinancing, and apply through a private lender rather than VA directly. FHA offers a cash-out product too, with its own limits.
What Do Seasoning and Occupancy Do to Your Plan?
They set when you can start and how far the loan can go. Seasoning is the waiting period a lender wants before a cash-out refinance. On conventional cash-out loans, the first mortgage being paid off must be at least 12 months old, counted note date to note date. A borrower must also have been on title for six months.
Exceptions exist: delayed financing for a recent cash purchase, inheritance and legal awards. If you paid cash for the home, delayed financing can let you recover that money sooner. The new loan is then limited to your documented purchase investment, within the program cap.
Occupancy is something you state at closing, so the loan has to match how you will really use the home. A cash-out can be written on a primary residence, a second home or an investment property, and occupancy sets the leverage. VA adds its own rule: you must live in the home you are refinancing. A home you have already moved out of generally will not work for a VA cash-out.
One more trap: if you keep the old home after the cash-out, you carry two housing payments. Plan for that on purpose, not by accident.
Will You Still Qualify for the Next Mortgage?
Having the cash does not mean you qualify. The new, larger payment on the old home counts as debt when the purchase lender qualifies you. And remember: the whole balance moves to the new loan’s terms, not just the cash portion.
Think about the file from the purchase lender’s side. Wholesale conventional programs start at a 620 decision score. For files decided by the automated finding, the total ratio ceiling is 50%. Manually underwritten loans run tighter, at 36% or 45%, with reserve and score factors set by the Eligibility Matrix. Higher ratios can also bring reserve requirements.
Reserves deserve their own look. Once you spend the cash on the down payment, it no longer counts as reserves. If the same asset is also shown as reserves, its value is reduced by the amount you borrowed against it. Lenders want to see cash left over after closing.
Sell the old home instead and the old payment disappears from your ratios. But then you are moving twice, or bridging between homes. Neither is simple.
Cash-Out Refinance, HELOC or Sale?
The cash-out refinance is one of three routes to the equity. The right choice depends on what you want to keep.
| Option | How you get cash | The catch |
|---|---|---|
| Cash-out refinance | New first mortgage | Whole balance resets |
| HELOC | Second lien | Extra payment to qualify around |
| Sell the old home | Equity at sale | Timing of two moves |
Honestly, a HELOC can be the better tool if your current first mortgage is one you want to keep. This one is a toss-up and depends on the numbers. A broker can compare the programs side by side. The best fit also depends on the second lien and how much you need.
What Does It Cost You Besides Closing Costs?
You trade equity for cash. The cap forces you to leave some equity in the home, and the new loan is larger than the old one. If you carry both homes, you are exposed to two housing payments at once. Your home is also the collateral, so falling behind puts it at risk.
The appraisal can work against you as well. A value lower than expected cuts the cash right when your offer is on the table. Start before you make an offer, not after.
Key Terms Defined
Lien: a legal claim against your home that must be paid before the home is free of debt, such as a first mortgage or HELOC.
Seasoning: the waiting period a lender wants, such as how long the loan has existed or how long you have been on title.
Limited cash-out refinance: a refinance that changes your loan terms and pays off existing debt, with only incidental cash back.
Delayed financing: a conventional exception that lets a cash buyer take a cash-out loan sooner, limited to the documented purchase investment.
Reserves: money left in your accounts after closing, which lenders may require on top of the down payment.
Next Steps
Start with three numbers: your expected appraised value, your current payoff, and the down payment you need on the new home. Those three tell you whether a cash-out refinance is a real plan or a stretch.
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. Program figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Can I use cash-out refinance money as a down payment on another home?
Yes, when the cash-out is documented. Fannie Mae’s guide treats borrowed funds secured by an asset as an acceptable source for a down payment, because they represent a return of equity. The purchase lender will want the cash-out closing disclosure, bank statements showing the deposit and the purchase contract.
Can I cash out 80% of my home’s value?
No. The 80% cap on a one-unit primary residence covers all liens combined. Your current mortgage, any second liens and closing costs come out first. The cash is what remains under the cap. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Does a rate-and-term refinance give me cash for a down payment?
Not directly. It allows only incidental cash back: Fannie Mae’s lesser of 2% of the new loan or $2,000, or Freddie Mac’s greater of 1% or $2,000. That is far too little for a down payment. A full cash-out refinance is the product built for it.
Can I use an FHA Streamline or VA IRRRL to pull cash out?
No. Both are streamlines for replacing an existing government loan, not equity tools. VA’s cash-out loan is the product for taking cash from equity, and it requires you to live in the home you are refinancing.
How soon can I start after buying my current home?
Conventional cash-out loans need the first mortgage to be at least 12 months old and a borrower on title for six months. Exceptions apply for delayed financing after a cash purchase, inheritance and legal awards. Check your own dates before making an offer on the next home.
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 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. Fannie Mae Eligibility Matrix
2. Fannie Mae Selling Guide: Borrowed Funds Secured by an Asset
3. Fannie Mae Trending Selling FAQs
4. Fannie Mae Selling Guide: Limited Cash-Out Refinance Transactions
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 to Qualify and Apply for a Cash-Out Refinance on Your Home · Cash-Out Refinance vs Home Equity Loan After a Recent Refinance · How to Run the New Payment on a Cash-Out Refinance Before Signing
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.