The Quick Read: The cash is the room under the leverage cap after your current mortgage payoff and financed closing costs are subtracted. On a conventional one-unit primary residence, the cap is 80% of appraised value, so a home with a payoff at half its value leaves about 30% of value before costs. What’s left after those costs is your remodel money, and it is never 80% of the home’s value.
The Formula Behind the Check
The cash you receive is the new loan minus everything the new loan has to pay off. In plain terms:
(Appraised value × maximum LTV) − payoff of your current first mortgage − financed closing costs = cash to you.
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.
Maximum LTV (loan-to-value) is the cap on the whole new loan, not on the cash. A homeowner hears “80%” and pictures 80% of the home’s value arriving in a check. It doesn’t work that way. The new loan has to retire the old mortgage first.
Consider the same idea in percentages of value, with no dollar figures. Assume the home appraises at 100% of value and the current mortgage balance is 50% of that value. An 80% cap leaves 30% of value of room. Closing costs financed into the loan come out of that 30%. Whatever remains is the cash.
Three things move that answer. The appraisal moves it most. The size of your existing balance moves it next. Costs rolled into the loan quietly shrink it.
What Are the Leverage Caps That Set the Ceiling?
Occupancy sets the leverage, and the caps differ by property type. Under the conventional parameters Lendmire works with, a cash-out refinance on a one-unit principal residence goes to 80% LTV. Two- to four-unit principal residences, second homes and investment properties are capped at 75%. A cash-out can be written on any of those occupancy types, so a second home is not locked out.
Two more rules shape eligibility:
- The first mortgage being paid off generally must be at least 12 months old, measured note date to note date.
- A borrower generally must have been on title for six months, with exceptions for delayed financing, inheritance and legal awards.
Texas has its own ceiling. A cash-out on a Texas homestead, a Section 50(a)(6) loan, is capped at 80% of the home’s value by the state constitution, whatever the occupancy type.
One wholesale lane stretches further. It reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio, a thirty-year fixed rate, a primary residence, a conforming loan balance and six months of seasoning. It is not written in Texas. That lane is the one exception to the usual rule that mortgage insurance applies above 80%. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
For a plain-language look at how the brokerage structures these loans, see Lendmire’s cash-out refinance programs page.
Worked Example: From Contractor Bid to Loan Size
Start with the bid, not the equity. Say the remodel bid is 15% of your home’s value. Using the same home as above (payoff at 50% of value, cap at 80%), the numbers look like this:
| Remodel bid (% of value) | Room under 80% cap | Cushion before costs |
|---|---|---|
| 15% | 30% | 15% |
| 25% | 30% | 5% |
| 35% | 30% | Short by 5% |
The cushion has to absorb financed closing costs and any overrun. The 25% bid looks like it fits, but 5% of value is thin. A project can finish above its bid, so a homeowner planning a 25% project would be wise to stress-test the contingency before committing.
When the appraisal comes in low. Suppose the home appraises 5% below what you expected. The cap now applies to 95% of the expected value, so the loan ceiling drops to 76% of the expected value. Payoff stays at 50%. The room shrinks from 30% to 26%. The 25% project now leaves only 1% of value of margin before costs. Here is the catch: a lower appraisal doesn’t reduce your payoff, so every point of lost value comes straight out of your cash.
If the shortfall is real, you have a few paths:
- Scale the project down.
- Phase the work.
- Cover the gap with savings.
- Use a separate home equity loan or line behind your existing mortgage.
That last path is worth weighing if your current first mortgage is one you want to keep. Keeping it avoids repricing the whole balance. It does add a second payment.
Can You Refinance a House That Needs Work?
Yes, but the type of loan changes. A standard cash-out loan sizes on the “as-is” appraised value and hands you the cash. A renovation refinance sizes on the “as-completed” value and holds the remodel money for the work.
Fannie Mae’s HomeStyle Renovation loan finances a purchase or refinance plus repairs. The guide sets no required improvements and no minimum renovation amount. On a refinance, the ceiling on renovation funds is tied to the as-completed appraised value. Fannie Mae’s consumer page describes the refinance version as limited cash-out and notes that a portion of project funds can be drawn up front for materials, permits or design fees.
The money is not freely spendable. Per Fannie Mae’s lender page, funds go into a custodial account. A final inspection and completion certificate are required, and any leftover funds reduce the principal balance. That is why a renovation loan is not the same as a standard cash-out loan. Think of it as a loan with a built-in spending plan.
FHA’s 203(k) works on the same idea. HUD describes it as insuring a purchase or refinance together with rehabilitation, with rehab money held in escrow and released when work is done. Standard and Limited versions exist. The Standard version requires a consultant and covers larger structural work. The Limited version fits smaller, non-structural projects.
The tradeoff is real. Renovation loans mean more paperwork: plans, bids, contractor review, inspections and draw management. If your project is modest and you want the cash in hand, a standard cash-out can be simpler. If your project is large, or the home is worth much more once finished, the as-completed sizing can reach further than today’s appraisal allows.
Rate-and-Term Is Not a Remodel Loan
A rate-and-term (limited cash-out) refinance pays off the existing first mortgage, the closing costs and any purchase-money second lien. Cash back is incidental. Fannie Mae’s cap 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. Those figures are small by design. Take more than the cap and the loan is treated as a full cash-out.
That matters for remodel planners. If someone tells you a limited cash-out will fund your kitchen, the math doesn’t work. Only the renovation versions, where funds are held for the work, are built for that.
Government streamlines don’t fund remodels either. An FHA Streamline and a VA IRRRL are designed for existing government loans. They lower cost or improve terms and carry no cash for projects. A VA cash-out refinance is a separate product. It can pay off liens of any type and provide cash, and it can allow far higher leverage than conventional. Many lenders set their own lower caps, though.
What Cash-Out Does to Your Monthly Budget
A cash-out refinance replaces your whole mortgage with a larger one. The CFPB’s guide to using home equity points out two consequences: the payment may rise, and payoff may take longer. The entire balance is repriced, not just the new money. If your current loan is one you’d rather keep, that repricing is the cost of the cash.
Equity also drops by the amount you take out. A remodel can lift value, but the lift is never certain. Lenders and appraisers won’t count every dollar spent as a dollar gained. Plan the project so you’re comfortable even if the added value comes in modest.
Pre-Application Checklist
Before talking to any lender, gather these:
- A written contractor bid, ideally two.
- Your current mortgage payoff balance and note date.
- A realistic contingency figure for overruns.
- A rough read on today’s value and expected finished value.
- Your title history, since seasoning rules look at how long you’ve held the home and the loan.
- Income, credit and asset documents. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a 50% total ratio ceiling.
If the remodel is large, ask early whether a renovation structure fits better than a standard cash-out.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
Payoff: The balance on your current first mortgage that the new loan must clear before you receive cash.
As-is value: The appraised value of the home in its current condition.
As-completed value: The appraiser’s estimate of value after planned renovations are finished, used to size renovation loans.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with only a small amount of cash back.
Seasoning: The minimum time you must have held the loan or the title before certain refinances are allowed.
Next Step
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. Reach the team at 828-256-2183, or request a quote through the Lendmire quote page.
Frequently Asked Questions
Can I take out 80% of my home’s value as cash?
No. The 80% cap on a conventional one-unit primary residence applies to the whole new loan. Your existing mortgage payoff and any financed closing costs come out first. Only the remainder reaches you. With a high balance on your current loan, that remainder can be small.
Will a limited cash-out refinance fund my remodel?
Not in a remodel-sized way. Cash back on a limited cash-out is capped at a small amount, and taking more reclassifies the loan as a full cash-out. If you want a refinance built around renovation, a program like HomeStyle sizes on the as-completed value and holds funds for the work.
What happens if my appraisal comes in lower than I expected?
Your loan ceiling drops, and your payoff doesn’t. Each point of lost value cuts into your cash. You can shrink the project, phase the work, add savings, or look at a separate home equity loan behind your current mortgage. Running a low-appraisal version of the numbers before applying avoids surprises.
Does the cash have to go to the remodel?
On a standard cash-out refinance, proceeds aren’t limited to specific purposes. Renovation loans differ, since funds are held in a custodial account or escrow and released as work is completed.
Should I borrow extra for cost overruns?
A cushion is wise, but extra borrowing means a bigger loan balance and a larger repriced mortgage. Build a contingency into the target, check it against the leverage cap, and consider whether savings or a smaller scope would be cheaper than borrowing more against your home.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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: HomeStyle Renovation Mortgages
2. Fannie Mae: HomeStyle Renovation (consumer page)
3. Fannie Mae: HomeStyle Renovation (lender page)
4. HUD: Section 203(k) Rehabilitation Mortgage Insurance
5. CFPB: Using Your Home Equity Guide
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 a Pledged-Asset Mortgage Lends vs. a Cash-Out Refinance · How to Qualify for a Cash-Out Refinance on a Co-Living House · How Much a Cash-Out Refinance Gives an S-Corp Owner
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.