The Quick Read: On a conventional cash-out refinance of a one-unit home you live in, the new loan tops out at 80% of the appraised value. Your cash is that maximum, minus what you owe, minus closing costs paid from proceeds. Some of your equity stays in the house on purpose, and the appraisal sets the number.
Key Takeaways
- The cap is a percentage of appraised value, not of your equity. At 80%, you keep at least 20% of the value in the home.
- Cash to you equals the maximum new loan, less the payoff of your current mortgage and any other liens, less closing costs paid from proceeds.
- Two- to four-unit homes and second homes sit at a lower 75% cap on the conventional program.
- The appraisal, a 12-month seasoning rule on your current mortgage, and a 6-month title rule can each shrink or delay the number.
- The maximum is a ceiling, not a target. What you should take depends on what the money does for you.
Equity You Have vs. Equity You Can Take
Equity is the appraised value minus what you owe. Equity you can take is a smaller figure. The lender applies a loan-to-value cap, and that cap leaves a cushion in the home.
Here is the gap in plain terms. Say your home is worth 100 units and you owe 50. You have 50 units of equity. At an 80% cap, the new loan can reach 80 units. That is 30 units of gross cash, not 50. Closing costs paid from proceeds come out of those 30.
A cash-out refinance also replaces your whole first mortgage. The new loan’s terms apply to the entire balance, not only the new money. A home equity loan or line of credit works differently, because your first mortgage stays in place. The CFPB’s guide to using home equity draws the same line.
Lendmire’s cash-out refinance programs follow this structure for homes you occupy. For a deeper look at the ratio itself, Lendmire’s piece How Much Equity For Cash Out Refinance? covers the same ground from the equity side.
The Formula, Step by Step
The math takes three steps.
1. Find the maximum loan. Multiply the appraised value by the program’s cap. For a conventional one-unit primary residence, the cap is 80%.
2. Subtract what gets paid off. That means your current first mortgage, plus any second lien you want to clear.
3. Subtract closing costs. Costs can usually be paid out of proceeds. That is convenient, but it lowers the cash you receive.
The result is your net cash. Underwriting then checks whether you qualify for that loan size. Across the wholesale programs Lendmire places files with, conventional loans generally start at a 620 decision score. The automated underwriting finding governs most files, with a total debt ratio ceiling of 50%. Manually underwritten loans use tighter ratio limits, and the reserve and score requirements come from the agency’s Eligibility Matrix. Every figure is subject to lender guidelines and full file review.
Three Worked Examples (Percent of Value)
All figures below are percentages of appraised value. They use the 80% conventional cap, and none are quotes.
| Your balance | Max new loan | Gross cash | What it means |
|---|---|---|---|
| 40% of value | 80% | 40% | Lots of room; costs barely dent it |
| 55% of value | 80% | 25% | Mid-range; costs matter more |
| 70% of value | 80% | 10% | Small cash; costs can eat much of it |
The pattern is simple. A low balance leaves a large gap between what you owe and the cap. A high balance leaves a thin slice. When the gross cash is small, closing costs take a bigger bite of it.
What a Lower Appraisal Does
The appraisal drives the whole calculation. Stay with the 55% balance example, and suppose the home appraises 5% below what you expected.
| Appraised value | Max loan at 80% | Gross cash |
|---|---|---|
| 100 units | 80 units | 25 units |
| 95 units | 76 units | 21 units |
Your balance stays at 55 units in both cases. Only the value moved, and a 5% miss cut the gross cash by 4 units, roughly one-sixth of it. A small appraisal gap hits a thin cash-out harder than a thick one.
How Loan Type Changes Your Limit
The cap depends on the program and on how you use the home. This table covers the conventional lane Lendmire arranges. It shows the leverage limits on a cash-out versus a refinance.
| Situation | Leverage cap |
|---|---|
| Cash-out, one-unit primary residence | 80% |
| Cash-out, two- to four-unit primary residence | 75% |
| Cash-out, second home | 75% |
| Rate-and-term, one-unit primary residence | 95% (97% in certain agency cases) |
The Fannie Mae Eligibility Matrix publishes these conventional figures by occupancy and unit count. Occupancy decides the leverage. A home you live in gets the highest cap.
One wholesale lane goes further. It reaches 89.99% LTV with no mortgage insurance. It requires a 680 score, a 50% ratio ceiling, a thirty-year fixed loan, a primary residence, a conforming balance, and its own six months of seasoning. It is a narrower lane, and it is not written in Texas. In Texas, a cash-out on the homestead is capped by the state constitution at the agency figure. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
FHA and VA work differently. HUD lowered the FHA cash-out cap years ago, and some older articles still quote the old, higher number. A second mortgage or line of credit does not create extra room under FHA, because the limit applies to combined debt. VA permits very high leverage on a home you occupy. Many lenders still set their own lower ceiling, and the borrower must meet credit, income, appraisal and funding-fee requirements. VA.gov’s cash-out page notes that closing costs can add up to thousands of dollars.
Above the conforming limit, jumbo programs take over with their own leverage and score rules. Lendmire can walk through the jumbo options if your balance is in that range.
Mortgage insurance rarely enters the picture on a conventional cash-out at 80%. Insurance applies above 80% LTV. Where it applies, it can be canceled on request 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%.
What Can Shrink Your Number
The cap sets the ceiling. These items pull the actual figure below it.
- The appraisal. A new appraisal is part of a conventional cash-out, and its value drives the cap.
- Existing liens. A second mortgage or line of credit that gets paid off reduces cash dollar for dollar. One you keep still counts against the cap on some programs.
- Credit and ratios. A lower score or a higher debt ratio can limit how much a lender will approve, even when the equity is there.
- Closing costs. Paid from proceeds, they reduce net cash.
- Property type. A two- to four-unit home or a second home carries the lower 75% cap.
- Seasoning. The mortgage being paid off generally must be at least 12 months old, measured from note date to note date. A borrower must also have been on title for 6 months. The Fannie Mae Selling Guide section on cash-out refinances states both rules.
- Back taxes. Real estate taxes more than 60 days delinquent can block the loan. An escrow account may fix it.
- A listing. A home listed for sale must come off the market by the time the new loan disburses.
Where the General Rule Breaks
Several situations bend the standard path.
Paid-off homes. A home with no mortgage still counts as a cash-out refinance. The 80% cap applies, and the whole loan is new money.
Recent cash buyers. Delayed financing can allow a cash-out inside the six-month window. The amount is capped at your documented purchase investment plus costs, so appreciation is not released this way. The current text should be confirmed, since the rule has appeared in different versions of the archived Selling Guide section.
Inherited or court-awarded homes. Inheritance and a legal award in a divorce or separation are exceptions to the six-month title wait.
LLC-held title. Time in an entity you control can count toward the six months. Title generally must move into your own name by closing.
Streamlines. The FHA Streamline and VA IRRRL are for existing government loans. They exist to lower a payment or improve terms, and they do not return meaningful cash. If cash is the goal, they are the wrong tool.
Rental or second-home questions. Occupancy decides the leverage. A second home is capped at 75% on the conventional program.
A practitioner’s note: the files that surprise people usually involve the appraisal or an overlooked second lien. Borrowers plan around their own estimate of value. Lenders plan around the appraiser’s. Running the formula at a value 5% lower than your hope gives you a more realistic floor.
Can You Take It vs. Should You
The maximum is a ceiling, not a recommendation. A few questions help set the right amount.
What is the money for? Home repairs or a project that adds value can justify taking more. Paying off other debts is the most common use, according to the CFPB’s research. That paper also flags the tradeoff. Moving unsecured debt onto your mortgage puts the home behind that debt. If payments become unsustainable, the consequence is no longer limited to a credit score.
What happens to the whole balance? The new loan replaces your first mortgage. If your current terms are favorable, giving them up to reach a small cash-out may not pay off. A small cash-out where closing costs absorb much of the proceeds is the clearest warning sign. This is the case where a home equity line of credit, which leaves the first mortgage alone, may fit better.
How much cushion do you want? Taking the full 80% leaves 20% of the value as your only buffer. A price dip, a repair bill or a job change can use that up. Taking less leaves room.
Does taking less change the file? Lower leverage can help a borderline file. Some programs treat lower loan-to-value as a strength, subject to lender guidelines.
For the bigger picture on why homeowners tap equity at all, see Lendmire’s piece Why Homeowners Tap Record Equity With a Cash-Out Refinance.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Cash-Out Refinance vs. Home Equity Loan vs. HELOC
| Feature | Cash-out refinance | Home equity loan / HELOC |
|---|---|---|
| First mortgage | Replaced | Stays in place |
| Loan structure | One new loan | A second loan on top |
| Cap applies to | New first loan | Combined debt |
| Best fit | Current loan terms are not worth keeping | Current loan terms are worth protecting |
The choice often turns on one question: is your existing first mortgage worth keeping? If yes, a second lien may serve better. If not, a cash-out refinance resets everything in one step.
Key Terms Defined
Equity: The appraised value of your home minus the total you owe against it.
LTV (loan-to-value): The loan amount divided by the appraised value, shown as a percentage.
CLTV (combined loan-to-value): All loans against the home added together, divided by the appraised value.
Seasoning: The minimum time you must have owned the home, or held your current mortgage, before refinancing for cash.
Limited cash-out refinance: A refinance that pays off your mortgage and costs, with only incidental cash back. Also called rate-and-term.
Delayed financing: An exception that lets a recent cash buyer take out a loan before the usual wait, capped at documented purchase costs.
Estimating Your Own Number
Gather five things: your best estimate of the home’s value, your current mortgage payoff, any second liens, your property type, and what you plan to use the cash for. Run the three steps with the 80% cap. Then re-run them at a value 5% lower. If both results still work for your plan, the next step is a conversation about the actual programs.
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
Can I take all of my equity?
No. Conventional cash-out caps the new loan at 80% of appraised value on a one-unit primary residence, so at least 20% of the value stays in the home. FHA is capped lower than many people expect, and VA allows high leverage but many lenders set a lower ceiling. All figures are subject to lender guidelines.
Does the appraisal change my number?
Yes, directly. The cap multiplies by the appraised value, so a lower appraisal lowers the maximum loan and the cash you receive. A 5% miss on value can cut gross cash by a much larger share when your balance is already high.
Do closing costs come out of my cash?
Usually, if you choose to pay them from proceeds. That keeps cash out of your pocket at closing but reduces the check you receive. You will see the figures on your Loan Estimate, which is a disclosure, not an approval.
Can I cash out right after buying?
Generally not. A borrower must have been on title for 6 months, and the mortgage being paid off must be at least 12 months old. Delayed financing, inheritance and a legal award in divorce are the named exceptions. Delayed financing limits the cash to your documented purchase investment plus costs.
What happens to my second mortgage or HELOC?
A refinance can pay it off as part of the new first loan, which reduces your cash. If you keep it, the cap on some programs, including FHA, applies to the combined debt. It does not add room.
For your own numbers, request a scenario review with Lendmire.
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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References
1. CFPB’s guide to using home equity
2. Fannie Mae Eligibility Matrix
3. VA.gov, Cash-Out Refinance Loan
4. Fannie Mae Selling Guide, B2-1.3-03 Cash-Out Refinance Transactions
5. Fannie Mae Selling Guide, B2-1.3-03 (archived version)
6. CFPB, Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How Much Equity a Vacation Home Cash-Out Refinance Releases at the Cap · How Much a Vacation Condo Cash-Out Refinance Releases · How Much to Pull and How Proceeds Pay Out on a Clean Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.