The Quick Read: On a one-unit home you live in, a conventional cash-out refinance caps your new loan at 80% of the appraised value, so at least 20% of the value stays as your equity. Second homes and two- to four-unit homes get a lower cap of 75%. That cap is a ceiling on the new loan, not the cash you receive, because the payoff of your old loan and any financed costs come out first. Credit, ratios and seasoning rules can also shrink the amount further, subject to lender guidelines and full file review.
Key Takeaways
- The limit is a loan-to-value (LTV) percentage. It is not a flat dollar amount.
- Cash to you equals the cap times the appraised value, minus everything the new loan must pay off or cover.
- The cap is 80% for a one-unit primary residence and 75% for two- to four-unit primary residences and second homes.
- You generally need a first mortgage that is at least 12 months old and a borrower on title for 6 months.
- Appraisals move the answer. A lower value cuts your cash faster than most people expect.
- Taking less than the maximum is often the smarter move.
What Does a Conventional Cash-Out Refinance Actually Do?
A conventional cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference. Conventional means the loan follows Fannie Mae or Freddie Mac rules. You can spend the cash on anything: a renovation, a buyout, debt payoff, a reserve fund.
Lenders limit how much of your home’s value the new loan can cover. That limit is the whole story of how much equity you can take. Every other rule either trims the cash or opens a door to it.
Freddie Mac’s Guide section 4203.1 sets cash-out caps of 80% for a one-unit primary residence and 75% for a second home. Fannie Mae’s rules sit in its Selling Guide section on cash-out refinance transactions, and its eligibility matrix holds the LTV rows. Across the wholesale programs Lendmire places files with, the one-unit primary figure of 80% is the anchor number. You can see how those programs are structured on the page for Lendmire’s cash-out refinance programs.
One more point. A lender can approve you for less than the LTV math suggests. Credit, income, and the appraisal all get a vote.
Key Terms Defined
Loan-to-value (LTV): The new loan balance divided by the home’s appraised value, shown as a percentage.
Equity: The home’s appraised value minus everything secured against it.
Seasoning: The waiting period a loan or ownership must meet before you can cash out.
Subordinate lien: A second loan on the home, such as a HELOC (a revolving line of credit secured by the house) or a home equity loan.
Limited cash-out refinance: A refinance that pays off your first mortgage and costs but returns only a small amount of cash. It is also called a rate-and-term refinance.
Note date: The date you sign the mortgage note. Seasoning tests often count from one note date to another.
How the Lender Works Out Your Maximum
The lender takes the cap, multiplies it by the appraised value, and subtracts what the new loan has to cover. What’s left is the most cash you can take. Here is the order, step by step.
1. Classify the loan. If you take meaningful cash, or you pay off a HELOC or second loan that was not used to buy the home, it counts as cash-out. Minimal cash back keeps it in the limited cash-out lane, which has a higher cap.
2. Get the appraisal. The appraised value sets the base. A low value shrinks the cap in dollar terms.
3. Apply the cap. For a one-unit primary residence, that is 80% of the value.
4. Subtract the payoffs. Your first mortgage comes out. So does any HELOC or other lien being paid off.
5. Subtract financed costs. Closing costs, points and prepaid items that you roll into the loan reduce what reaches you.
6. What remains is your cash. Underwriting still has to approve it.
Run the numbers on a home at 100% of its value. Say your first mortgage is 55% of that value, and you have no other liens. The 80% cap leaves room for 25% of value, before costs. Financed costs come out of that 25%, and you receive the rest.
Now flip it. Say you want to take 15% of the home’s value. Your starting balance plus financed costs must fit under 65% of value. That is the reverse calculation most guides skip. If your balance is already above that line, the cash you want does not fit under the cap.
A second example shows how liens eat the room. Your first mortgage is 45% of value and a HELOC adds 10%. Both get paid off, so the payoff is 55%, the same as the case above. The cap does not care how many loans make up the balance. It only cares about the total.
How Does the Appraisal Change Your Cash?
The appraisal moves your cash more than any other single input. A small drop in value, multiplied by the cap, takes a visible bite out of your proceeds.
The table below holds your balance at 60% of the value you expected. It shows the room under the 80% cap, before costs, if the appraisal lands higher or lower. Values are shown as a share of your expected value.
| Appraised value (share of expected) | Cap on new loan | Room above 60% balance |
|---|---|---|
| 105% | 84% of expected value | 24% of expected value |
| 100% | 80% of expected value | 20% of expected value |
| 95% | 76% of expected value | 16% of expected value |
| 90% | 72% of expected value | 12% of expected value |
A 10% appraisal shortfall cuts your room from 20 to 12. That is a 40% drop in cash from a 10% drop in value. Leverage works both ways. If you are counting on a precise amount of cash, build in a cushion for the appraisal.
Caps by Property Type and Occupancy
Occupancy and unit count decide your cap. Primary residences get the most room, and everything else gets less.
| Property | Conventional cash-out cap |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
| Second home | 75% |
Investment property also caps at 75% on conventional cash-out, but that is a different lane with different rules. Occupancy decides the leverage, and this article stays with the home you live in.
Loan size and loan type can change the cap too, so a very large loan may be treated differently. Your loan officer has to check the current Fannie Mae matrix for your exact case.
For comparison, a limited cash-out refinance on a one-unit primary residence reaches 95% LTV, with mortgage insurance above 80%. Mortgage insurance is a policy that protects the lender when your equity is thin. The tradeoff is simple: more leverage, almost no cash back. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
What Shrinks Your Cash Before It Reaches You
Your net cash is smaller than the cap suggests. The new loan has to cover your payoff, any liens being cleared, and any costs you finance. The cash is what remains.
Four items do most of the trimming:
- Your existing balance. This is the largest line, and it is fixed by your current loan.
- Other liens. A HELOC or second loan that was not used to buy the home gets paid off, and that makes the refinance a cash-out.
- Financed closing costs. Appraisal, title, and lender charges can be paid at closing or rolled into the loan. Rolling them in raises the balance and lowers your cash. Your Loan Estimate and Closing Disclosure show the figures.
- Pricing adjustments. Fannie Mae applies loan-level price adjustments to certain cash-out loans based on LTV and credit score. They are baked into your pricing, and they usually rise as LTV climbs.
Mortgage insurance rarely enters a standard cash-out. Conventional mortgage insurance applies to loans above 80% LTV, and a plain cash-out loan stops at 80%, so you will not normally carry it. It does come up on limited cash-out loans, which reach higher leverage. On those loans, you can ask to cancel it at 80% of the original value with good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%. The one cash-out exception is the narrow lane covered next, which goes above 80% with no mortgage insurance. Final terms follow a full review of property, leverage, and credit.
The Gates Beyond Equity
Equity is only one test. You also have to clear seasoning, credit, ratios and a few property rules.
Seasoning. Most conventional cash-out files need two clocks to run. The first mortgage you are paying off must be at least 12 months old, counted note date to note date. And at least one borrower must have been on title for 6 months. Fannie Mae’s cash-out refinance guide lays out both tests, and Freddie Mac follows a similar pattern.
Credit. The wholesale conventional programs start at a 620 decision score. The automated underwriting finding governs most files.
Ratios. The total debt-to-income ratio ceiling is 50% on the automated lane. Manually underwritten loans run tighter, at 36% or 45%, with reserve and score factors from the Eligibility Matrix. Higher ratios can also trigger a reserve requirement, meaning you must show savings after closing. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Listing status. If your home was listed for sale, it must be off the market by the date the new loan funds. It is a one-date check, not a lifetime ban.
Occupancy. On a primary residence, the borrowers have to live there.
A practical note. Most failed cash-out plans do not fail on the cap. They fail on the appraisal, on a high ratio, or on seasoning that was one clock short. Check those three before you fall in love with a number.
Can You Go Above 80%?
Sometimes, on a narrow lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. The conditions are tight: a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence, a conforming loan balance, and its own six months of seasoning. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
That lane is not a loophole. It is a separate program with its own file review, and it does not apply to second homes or multi-unit properties. It also is not written in Texas, where a cash-out on a homestead is capped by the state constitution at the agency figure.
The honest read: most conventional cash-out borrowers should plan around 80%. Treat the higher lane as something to ask about, not something to count on. Approval is never a given, and every figure is subject to lender guidelines.
Where the Rule Breaks: Edge Cases
The 80% rule has named exceptions. These are the ones that come up most.
- Recent cash buyers (delayed financing). If you bought with cash and want to pull money out soon after, the six-month title wait can be waived. The purchase must be arm’s-length, and a settlement statement must show no mortgage financing. It does not skip the cap, the appraisal, or the credit review.
- Inheritance or a legal award. Divorce settlements and inherited homes can waive the title wait when documented.
- Trust or LLC title. Time held in a revocable trust can count when you are its primary beneficiary. Entity ownership can count under some conditions, subject to program terms, and title usually has to move into your name by closing.
- Homes owned free and clear. A new loan on a home with no mortgage is treated as cash-out.
- A second loan from the purchase. A second lien used to buy the home can stay inside a limited cash-out refinance. A HELOC drawn later for other reasons cannot.
- Co-owner buyouts. Using proceeds to buy out a co-owner is handled under special cash-out rules, and the cash-out caps still apply to the loan.
- Student loan payoff. Fannie Mae waives the loan-level price adjustment when proceeds pay off eligible student loans.
- Manufactured homes. Caps run much lower, and single-width homes are not eligible for cash-out under Fannie Mae’s rules.
- Limited cash-out refinances. Fannie Mae sets a small cap on cash back for these. It revised that limit in a recent announcement, so confirm the current figure before you plan around “just a little cash.”
- State rules. Some states add their own cash-out rules, Texas being the obvious one.
If your situation touches any of these, say so up front. They change which rules apply, and the loan officer needs to know before the file is built.
Should You Take the Maximum?
Usually not. Maximum cash means minimum equity, and that has real costs.
Pulling cash out replaces your current loan. You lose the existing loan’s balance and terms and start a new one at a higher balance. The CFPB notes that cash-out refinances tend to carry higher costs, higher monthly payments and bigger balances than other refinances. It also warns that rolling unsecured debt into the mortgage puts the home behind that debt. A card balance can be missed and survive. A mortgage payment missed too often cannot.
Here is a simple way to weigh it.
| Option | Typical cap on a one-unit home | Best fit |
|---|---|---|
| Cash-out refinance | 80% | One large sum, replacing the old loan |
| Limited cash-out refinance | 95% | Changing the loan, with little cash back |
| HELOC or home equity loan | Set by the lender | Keeping your first mortgage as it is |
A HELOC or home equity loan leaves your first mortgage untouched. The CFPB says those products tend to carry lower costs and lower foreclosure risk than cash-out refinances. If your current first mortgage is one you would hate to lose, that matters.
Consider a few questions before you pick a number:
- Does the project or payoff you are funding need all of this cash?
- How much equity are you comfortable leaving on the table if prices dip?
- Would a smaller cash-out leave you safely under 80% with room to spare?
- Does the new payment fit your budget with room to spare?
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Comparing Your Options
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. Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders and does not lend directly. Every figure above is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
How much equity do I have to keep after a conventional cash-out refinance?
On a one-unit primary residence, you keep at least 20% of the appraised value. On a second home or a two- to four-unit primary residence, you keep at least 25%. The cap is measured against the new loan, so the payoff and financed costs count against it.
Can I take out all of my equity?
No. The new loan is capped at a percentage of value, so some equity always stays in the home. And even the 80% room shrinks once your payoff, other liens and financed costs come out.
Does a HELOC change how much I can take?
Yes. If the HELOC was not used to buy the home, paying it off makes the refinance a cash-out, and its balance counts against the cap. A second loan used to purchase the home can stay inside a limited cash-out refinance.
Can I cash out right after I buy a home?
Usually not. One borrower generally needs six months on title, and the loan being paid off must be 12 months old. Delayed financing is the main exception for recent cash buyers, and inheritance and legal-award cases are waived when documented.
Does the appraisal really matter that much?
It does. The cap is a percentage of the appraised value, so a lower value cuts your room by more than the percentage drop. A 10% shortfall in value can cut your cash by roughly 40% in a typical case, as the table above shows.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s conventional loan programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Freddie Mac Guide section 4203.1
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. Fannie Mae Selling Guide Announcement SEL-2025-08
4. CFPB
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 a Conventional Cash-Out Refinance Releases · Can You Do a Conventional Cash-Out Refinance Without a Mortgage? · How Much Equity a Conventional Cash-Out Refinance Leaves in Your Home
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.