The Quick Read: Not directly. Deferment does not shrink your cash. The program’s LTV cap and your home’s appraised value set the ceiling. What deferment changes is the monthly payment an underwriter counts against you, and that can lower the loan you qualify for. Less loan means less cash.
How Is the Cash Calculated?
The cash you receive is the maximum new loan minus what the new loan must pay off. That means the payoff of your current first mortgage plus closing costs. Your student loan’s status is not an input here.
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.
LTV, or loan-to-value, is the new loan divided by the home’s appraised value. A cash-out refinance replaces your current mortgage with a bigger one and hands you the difference. Across the wholesale programs Lendmire places files with, the conventional cap is 80% LTV on a one-unit primary residence. It is 75% on two- to four-unit primary residences, second homes and investment property. Occupancy sets the leverage. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Here is the picture in percentages. Say your home appraises at 100% of value and your current mortgage sits at 55%. At an 80% cap, the new loan can reach 80%, which leaves 25% of the home’s value before closing costs. Closing costs come out of that 25% or get financed into the loan. What remains is your cash.
Two things move that number, and neither is your student loan.
- The appraisal. A lower value cuts your cash at the cap, dollar for dollar.
- Your current balance. A bigger mortgage payoff leaves less equity to take out.
Lendmire’s cash-out refinance programs page lists the program lanes themselves. All figures here are subject to lender guidelines and full file review. None of it is a commitment to lend.
Is There a Way to Get Past 80%?
Yes, in one narrow lane. A wholesale program reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% total ratio, a thirty-year fixed loan, a primary residence, a conforming balance and six months of seasoning of its own. This lane is the exception to the usual rule that mortgage insurance applies above 80%. It is not written in Texas. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Texas has its own cap. A cash-out on a Texas homestead, known as a Section 50(a)(6) loan, is limited to 80% of the home’s value by the state constitution.
Seasoning is the waiting period a lender wants before you can refinance. More on that below.
Where Deferment Does Matter: The Payment an Underwriter Assumes
Deferment matters because underwriters cannot treat a paused student loan as zero debt. Fannie Mae’s Selling Guide says deferred installment debts must be included in your recurring monthly obligations. So a loan with no bill still produces an assumed payment.
DTI, or debt-to-income, compares your monthly debts to your monthly income. A bigger counted payment pushes DTI up. A higher DTI can shrink the loan you qualify for. A smaller loan leaves you less cash.
That is the real link between deferment and cash. It works through qualifying, not through the equity formula.
Each program counts the payment differently:
| Program | How a deferred loan is counted |
|---|---|
| Fannie Mae | 1% of the balance, or a documented full payment |
| Fannie Mae (income-driven plan) | $0 only with documentation of the actual payment |
| VA | No payment if deferred 12+ months past closing |
| VA (repayment starts within 12 months) | 5% of the balance, divided by 12 |
| FHA | Its own formula; your loan officer confirms it |
For Fannie Mae, the lender may use 1% of the outstanding balance or a fully amortizing payment from your documented repayment terms. If you are on an income-driven repayment plan, the lender may document that your actual payment is zero, and the debt then adds nothing to your debt-to-income ratio. IDR means income-driven repayment, a federal plan that sets your payment from your income.
VA works differently. Under VA Circular 26-17-02, a borrower who provides written evidence that the debt will stay deferred at least 12 months past closing needs no counted payment. If repayment is already running, or is set to start within 12 months after closing, the lender must count 5% of the balance divided by 12. That written evidence is the whole ballgame on VA files.
Freddie Mac also counts a payment above zero for student loans in deferment or forbearance, so ask your loan officer how the current guide applies to your loan. These formulas have changed over time. FHA replaced its old rule too, which is why a quoted figure from an old article is a red flag.
Deferment, Forbearance and a $0 Plan Are Not the Same
Deferment pauses payments, and sometimes interest, for a set reason. Forbearance also pauses payments, but interest usually keeps building. A $0 income-driven plan is an active repayment plan whose calculated bill happens to be zero.
Underwriters treat these differently on paper. A $0 plan needs paperwork proving the amount. A deferment or forbearance usually triggers the substitute payment.
What Documents Prove the Deferment?
Bring three things to the table:
1. A servicer statement or deferment letter showing the balance, the status and the end date. 2. Your credit report, which may show $0 or no payment at all. 3. For VA, written proof the deferment runs at least 12 months past closing.
Does a Student-Loan Cash-Out Put the Cash in Your Pocket?
Mostly no. Fannie Mae has a student loan cash-out refinance, delivered with special feature codes. It pays the student loan directly and waives the usual cash-out pricing add-on when its requirements are met. Cash back to you is held to a small incidental amount.
So this route answers a different question. It is for the borrower who wants the student debt gone, not the borrower who wants spendable money. Ask whether the program fits your loans before you assume it does.
Compare that with a standard cash-out. You choose how to use the proceeds, including paying down student debt. The cash you get is whatever remains after payoffs and costs.
Can a Rate-and-Term Refinance Pull Cash?
Only a sliver. A refinance, also called a limited cash-out refinance, pays off your first mortgage, closing costs and a purchase-money second. Only incidental cash comes back. Fannie Mae’s figure is the lesser of 2% of the new loan or $2,000. Freddie Mac’s is the greater of 1% of the new loan or $2,000.
The FHA Streamline and the VA IRRRL are rate-and-term products for existing government loans. Neither is a source of cash.
Does Deferment Count Toward Seasoning?
No. Seasoning is a separate clock tied to your mortgage and your title, not your student loans. Freddie Mac’s guide requires the first mortgage being paid off to be at least 12 months old, counted from note date to note date. At least one borrower must also have been on title for six months. There are exceptions, including delayed financing, inheritance and legal awards.
A year of deferment does nothing for either clock. If you bought the home recently, your waiting period is about the mortgage, not the paused loans.
What Do You Give Up by Paying Off a Student Loan With Home Equity?
You swap unsecured debt for debt your house secures. That is the central tradeoff, and it deserves a straight look.
The Consumer Financial Protection Bureau cautions that paying non-mortgage debts with mortgage debt can increase the risk of foreclosure. Miss student loan payments and your credit takes the hit. Miss mortgage payments and the house is at risk.
If the loan is federal, you also lose protections the moment it is paid off:
- Income-driven plans that can set your payment based on your income, including a payment of zero.
- Forgiveness. Per StudentAid.gov, balances on these plans may be forgiven after 20 or 25 years of payments.
- Deferment and forbearance options for hard stretches.
Private loans rarely carry those features, so the tradeoff looks different. Federal or private, a cash-out also replaces your entire first mortgage, not just the piece you need. The new loan carries new terms, and those terms can cost more over time than the loan it replaced. Weigh that against the student loan’s terms before you commit.
Should You Leave Deferment Before You Apply?
It depends on which number you are chasing. Three common cases:
- You want the most cash possible. A lower counted payment helps DTI. On a VA file, long documented deferment helps. On a conventional file, an income-driven plan with a documented payment of zero may beat the substitute payment.
- You want the student loan gone. Paying it off in the refinance removes that debt from your DTI. The new mortgage payment replaces it.
- Your DTI is already tight. Check this first. A 50% total ratio ceiling applies on the conventional lanes, and a deferred loan’s assumed payment eats into it.
This one is a genuine toss-up for borrowers with moderate balances. Paying off a small loan can lift DTI enough to raise your loan amount, while a large balance may not be worth securing against the house. A loan officer can run both versions of your file side by side.
Common Mistakes and Myths
- “Deferred loans don’t count.” On conventional files they do. VA’s documented 12-month deferment is the main exception.
- “Deferment lowers my cash.” Not directly. The LTV cap and the appraisal do.
- “A limited cash-out gives no cash.” It gives a small incidental amount.
- “The student-loan cash-out program hands me cash.” It pays the servicer and caps what you keep.
- “A streamline can pull equity.” It cannot.
- “The old 2% rule still applies.” Those formulas have been replaced. Always ask what the current guide says.
Key Terms Defined
Cash-out refinance: A new, larger mortgage that pays off your old one and gives you the difference in cash.
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
DTI (debt-to-income): Your monthly debt payments divided by your monthly income.
Deferment: A pause in student loan payments for an approved reason.
Forbearance: A pause or reduction in payments where interest usually keeps growing.
IDR (income-driven repayment): A federal plan that sets your payment from your income, sometimes at $0.
Seasoning: The waiting period a lender requires before you can refinance or take cash out.
Appraisal: A professional estimate of your home’s value that sets the base for the LTV cap.
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.
Frequently Asked Questions
Will my deferred student loan stop me from getting a cash-out refinance?
Not by itself. Underwriters count an assumed payment for the loan, and that can raise your DTI. If your ratio still fits the program, the loan does not block you. If it does not, paying off the loan in the refinance, or documenting a lower payment, may change the math. Everything is subject to lender guidelines and full file review.
Does deferment change my appraised value or how much equity I have?
No. Equity is your home’s value minus your mortgage balance. Student loans sit outside that calculation. They only enter through DTI, where a deferred loan’s assumed payment can lower the loan you qualify for.
Can I pay off only some of my student loans with the proceeds?
On a standard cash-out, yes. You choose where your proceeds go, and each loan you pay off removes its payment from your DTI. The cash you keep shrinks by the amount you send to servicers. Ask for a current payoff figure from each servicer, because accrued interest can make payoff larger than the balance you see.
How much cash can I keep if I use the student-loan cash-out program?
Very little. That program is built to pay the student loan directly, and cash back to you is limited to a small incidental amount. If you want spendable cash, a standard cash-out refinance is the better fit, subject to the program’s LTV cap and your qualifying ratios.
Does paying off a federal student loan with a cash-out end my federal protections?
Yes. Once the loan is paid, income-driven plans, forgiveness options and federal deferment rights end for that loan. Private loans usually lack those features. Decide with that tradeoff in view.
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.
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: Monthly Debt Obligations
3. Freddie Mac Guide Section 4301.5
4. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
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 With High Equity and Low Income? · How Much Overtime Income a Cash-Out Refinance Lender Will Count · How to Qualify for a Cash-Out Refinance on a Co-Living House
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.