The Quick Read: Yes. On a one-unit primary home, a conventional cash-out refinance tops out at 80% loan-to-value, while a purchase can reach 95% and, for a qualifying first-time buyer on a fixed rate, 97%. A rate-and-term refinance sits close to the purchase figures. The reason is risk: taking equity out leaves the lender with a thinner cushion. The exact ceiling still depends on the property, how it is used, and the lender’s file review.
Who Each Option Is Really For
A purchase loan is for someone buying a home and putting a small down payment into it. A refinance is for a homeowner who wants a different loan on the same balance, with only a sliver of cash back. A cash-out refinance is for a homeowner who wants to turn equity into spendable money and accepts a lower leverage ceiling to do it.
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: 7.24% as of October 29, 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 leverage gap is the practical difference. A borrower with 10% equity can often do a rate-and-term refinance. The same borrower cannot do a cash-out on the same home, because the cash-out ceiling asks for at least 20% equity left in the property. That fits what the federal consumer-finance regulator says: lenders typically require you to keep at least 10% to 20% of your home value as equity, and no option lets you convert all of it to cash.
Across the wholesale programs placed through Lendmire’s cash-out refinance programs page, that pattern holds. The agency rules set the ceiling, and the individual lender’s guidelines can sit at or below it.
Side-by-Side
The figures below are conventional (Fannie Mae and Freddie Mac) limits for a principal residence unless noted. They are subject to lender guidelines and full file review.
| Factor | Purchase | Rate-and-Term Refinance | Cash-Out Refinance |
|---|---|---|---|
| Max leverage, one-unit primary | 95%; 97% for first-time buyer, fixed | 95%; 97% in limited cases | 80% |
| Two- to four-unit primary | 95% | Lower than one-unit | 75% |
| Second home | 90% | Lower than primary | 75% |
| Investment property | 85% one unit; 75% two to four | Lower than primary | 75% |
| Cash to borrower | None (down payment goes in) | Incidental only | Any purpose |
| Mortgage insurance | Required above 80% | Required above 80% | Not needed at 80%; one wholesale lane is the exception |
| Credit floor | Wholesale programs start at a 620 score | Same starting point | Same starting point; 680 on the no-MI lane |
| Seasoning | None | Existing loan on file | First mortgage 12 months old; 6 months on title |
| Documentation | Full income, assets, contract | Full file, payoff statement | Full file, payoff statement, appraisal |
The Fannie Mae Eligibility Matrix sets different maximums by transaction type, occupancy and unit count. That is the source for the pattern in the table. Freddie Mac runs a separate cash-out category too, and its leverage limits are set in its own Guide. A one-line pointer for the investment and second-home rows: occupancy decides the leverage, and cash-out is written on a primary home, a second home or an investment property.
Why Cash-Out Is Capped Lower
A purchase has a sale price set by a real buyer and seller. That price anchors the value. A cash-out relies on an appraisal alone, which is an estimate. If the estimate runs high, the lender is exposed.
There is also borrower behavior. Someone who takes equity out has less of their own money at stake in the home. Lenders price and cap that risk. Freddie Mac confirms a separate cash-out category with an added credit fee in price on those loans. The mechanics matter more than the number here: the ceiling drops, and the pricing grid also treats cash-out differently.
What Counts as Cash-Out
Cash-out is broader than “I got a check.” Fannie Mae’s guide treats a cash-out as taking equity out of the property that may be used for any purpose. A few situations catch people off guard:
- Taking more than the allowed incidental cash back. Fannie Mae’s limit is the lesser of 2% of the new loan amount or $2,000.
- Paying off a second lien that was not used to buy the home.
- Refinancing a home that is owned free and clear. A new loan on a paid-off home is still classified as cash-out.
A rate-and-term refinance pays off the existing first mortgage, the closing costs and a purchase-money second lien. Buying out a co-owner under a written agreement is also a limited cash-out transaction at both agencies. The 95.01% to 97% tier is narrower still. Fannie Mae’s guide limits it to a one-unit principal residence and excludes high-balance and adjustable-rate loans.
When a Purchase Loan Is the Better Fit
A purchase loan is the only route if you are buying. It carries the highest leverage in the table, and it has no cash-out seasoning rule. The tradeoffs:
- Low down payment is possible. A first-time buyer on a fixed rate can reach 97% LTV, meaning 3% down. Everyone else on a one-unit primary tops out at 95%.
- Mortgage insurance applies above 80%. It can be requested off at 80% of the original value with a good payment history, no subordinate liens and no decline in value, and the servicer must end it automatically at 78%. Lendmire’s conventional program sheet lists typical annual premiums of 0.58% to 1.86% of the balance. That is the sheet’s range, not a quote.
- Value is the lesser of price and appraisal. If the appraisal comes in under the contract price, the loan amount follows the lower number.
Purchase leverage is generous because the buyer is bringing a real down payment and a documented transaction. Nothing is being pulled out.
When Cash-Out Refinance Is the Better Fit
Cash-out fits a homeowner with real equity and a specific use for it. The gate is equity, not credit alone.
Equity. At 80% on a one-unit primary, you need to keep 20% in the home after payoff, liens and financed costs. The cap limits the whole new loan, not the cash you walk away with. Payoff comes first. Second liens come next. Financed closing costs count toward LTV too.
Seasoning. The first mortgage being paid off must be at least 12 months old, counted note date to note date. A borrower must have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist. A cash buyer can use delayed financing to pull money back out inside the six-month window, and it still follows cash-out leverage. Lendmire’s article Smaller Cash-Out Refinance vs. Waiting After an All-Cash Rental Purchase covers that decision.
The no-MI wholesale lane. One wholesale lane reaches 89.99% LTV with no mortgage insurance. It needs a 680 score, a 50% ratio and a thirty-year fixed on a primary residence with a conforming balance. It has its own six months of seasoning. It is the one exception to the rule that mortgage insurance is required above 80%. It is not written in Texas. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Texas homesteads. 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. That is a state rule, not an agency one. Other states may layer their own rules on cash-out loans.
Credit and ratios. The wholesale conventional programs start at a 620 decision score, or 640 on an adjustable rate under manual underwriting. The automated finding governs most files, with a total ratio ceiling of 50%. Manually underwritten loans run at 36% or 45%, depending on the reserve and score factors in the Eligibility Matrix. Some lenders set a higher floor than the program minimum.
A Worked Example in Percentages
Take a home appraised at 100 units of value, with a payoff of 60 units and a purchase-money second lien of 5 units. On a conventional one-unit primary, the 80% ceiling allows a new loan of 80 units. Payoff and second lien use 65. Financed closing costs take a few more. What remains is the cash.
Now suppose the appraisal comes in 5% lower, at 95 units. The ceiling falls to 76. Payoff and the second lien still take 65, so the cash left shrinks by more than the 5% miss suggests. A modest appraisal miss cuts cash disproportionately because the payoff does not move.
On a purchase, the same appraisal miss works differently. Value is the lesser of price and appraisal. If the price is 100 and the appraisal is 95, the loan is sized on 95, and the buyer covers the gap.
Rate-and-Term vs. Cash-Out vs. Streamlines
The government streamlines break the pattern. They do not test equity the same way.
- FHA Streamline. For an existing FHA loan: no appraisal, a limited credit review and a net tangible benefit test. An FDIC summary says there are no LTV limits and no cash may be taken out. An FHA rate-and-term refinance that uses an appraisal runs to 97.75%.
- VA IRRRL. For an existing VA loan: a 0.5% funding fee unless exempt, no VA appraisal, a net tangible benefit and seasoning of the later of 210 days and 6 payments. VA’s own pamphlet says an IRRRL generally needs no appraisal, credit information or underwriting, and can only refinance the existing VA loan. A VA cash-out is a different product: it needs an appraisal and a Certificate of Eligibility, and the borrower must live in the home. VA rules allow very high leverage, and individual lenders often set lower caps.
- FHA cash-out. The ceiling is 80% of adjusted value. That was lower than the older cap, which no longer applies.
- Jumbo. Above the conforming limit the jumbo lanes take over: a 660 decision score, leverage to 90%, loans to $5,000,000 and a 50% ratio ceiling on the fixed lanes.
Why Two Lenders Can Quote Different Caps
The agency number is a ceiling. A lender can sit at it or below it. Reasons a cap comes in lower than the table:
- A credit score or ratio that falls short of the best tier.
- A property type the lender treats cautiously.
- A thin reserve position on a file that needs more.
- A lender overlay that is tighter than the agency rule.
On a manually underwritten file, a ratio above 45% can add a reserve requirement. This is why a broker shops more than one wholesale lender. The lenders that write a given cash-out depend on the property, the credit profile and the documentation. The best program for your situation may not be the one with the highest headline LTV. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Should You Borrow to the Cap?
Not always. A few questions help:
1. Does the use of the cash justify a larger balance and a restarted term?
2. Would a smaller cash-out leave room if the appraisal runs low?
3. Would a limited cash-out, a home equity loan or a HELOC keep a good first mortgage in place?
The CFPB warns that a cash-out refinance may extend the time it takes to pay off your debt. Its research on cash-out borrowers found many use proceeds to pay down card and auto debt.
Key Terms Defined
LTV (loan-to-value): The new first-lien loan divided by the home’s value.
CLTV: The same ratio with subordinate liens added to the first loan.
Limited cash-out refinance: A refinance that pays off the existing loan and costs and returns only incidental cash.
Seasoning: The minimum time a loan or a borrower’s ownership must be in place before a transaction is allowed.
Net tangible benefit: A test that the streamline refinance gives the borrower a real, documented gain.
What to Prepare
- The current mortgage statement and payoff details.
- A list of any second liens and how they were used.
- The date you took title and the note date of the loan being paid off.
- Income, asset and credit documentation for a full file.
- Your target cash amount and what it is for.
Bring the plan before the appraisal. It lets the broker match the scenario to the right program instead of guessing.
Frequently Asked Questions
Why is cash-out LTV lower than purchase?
Cash-out removes equity the borrower already has, and the value rests on an appraisal rather than a sale price. That leaves less cushion and more valuation risk. The agencies set a lower ceiling to match, 80% versus 95% on a one-unit primary home.
Can a lender go above the cap?
Not on the conventional agency programs. The cap is a ceiling, and a lender may set its own limit at or below it. A few products work differently: the FHA Streamline and the VA IRRRL do not test equity in the usual way, and they exclude meaningful cash back. All of this is subject to lender guidelines and file review.
Does a HELOC I’m keeping count toward the limit?
Usually yes, in the combined measure. Fannie Mae’s matrix caps LTV, CLTV and HCLTV together, so a second lien left in place takes room away from the first loan. The details depend on the program and the lender.
Do I need 20% equity for a cash-out?
On a conventional one-unit primary home, yes, because the ceiling is 80%. The CFPB also notes that lenders typically want a 10% to 20% equity cushion left over. One wholesale lane reaches 89.99% with no mortgage insurance at a 680 score, but it is not available in Texas and has its own seasoning.
Is the cap the same in every state?
No. Texas caps a homestead cash-out at 80% of the home’s value by the state constitution, and some other states add their own rules to cash-out loans. Lendmire is licensed for consumer lending in 16 states, so availability depends on where the home is. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Weighing 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. Nothing here is a commitment to lend, and every figure is subject to lender guidelines and full file review.
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.
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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. CFPB, Using Home Equity guide
2. Fannie Mae Eligibility Matrix
3. Freddie Mac Cash-Out Refinance
4. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
5. FDIC summary
6. 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: Cash-Out Refinance Lenders for Any Purpose With No Restrictions on Use · Cash-Out Refinance Lenders With More Than 40% Equity and No Appraisal · Cash-Out Refinance Lenders When You Need a Lump Sum From Your Equity
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
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.