The Quick Read: It depends, because the two limits are built from different things. A pledged asset line (PAL) is sized from your investment portfolio, and the firm that issues it sets the number. A cash-out refinance is sized from your home’s appraised value and a loan-to-value cap. A PAL suits a buyer who holds a large taxable portfolio and wants cash for a down payment without selling. A cash-out refinance suits an owner with equity who wants a fixed, home-backed source of cash.
What a PAL Actually Is (and Why “How Much” Has Two Answers)
A pledged asset line (PAL) is a revolving line of credit secured by stocks, bonds or similar holdings in a taxable account. You borrow against the portfolio instead of selling it. The lender assigns an advance rate to each eligible holding, and those add up to your limit.
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.
That is why no single “PAL number” exists. The Federal Reserve cites a typical range of 50 to 95 percent of the account. The same note says these lines usually carry a variable rate and often require interest-only payments. Your own line could land anywhere in that range, or outside it, depending on what you hold.
A cash-out refinance works the other way around. A new first mortgage pays off the old one, and what is left over comes to you as cash. The cap is a percentage of appraised value, minus what you already owe, so it counts every lien on the home.
So the comparison is not dollar against dollar. One limit comes from your portfolio. The other comes from your house. A buyer with no home to refinance cannot use the cash-out refinance at all, and an owner with a thin portfolio cannot use the PAL.
There is a second wrinkle. On a purchase, the PAL is not the mortgage. It is the source of your cash to close. The mortgage is a separate loan with its own limits.
Side-by-Side
Here is the comparison. Program figures describe the conventional wholesale lanes Lendmire places files with, and every figure is subject to lender guidelines and full file review.
| Factor | Purchase (PAL funds the cash) | Cash-out refinance |
|---|---|---|
| What sets the limit | Mortgage LTV cap; PAL limit is set by the PAL firm | Appraised value times an LTV cap |
| Leverage, one-unit primary | 95%, or 97% for first-time buyers on fixed | 80% |
| Leverage, 2-4 units | Up to 95% on a primary residence | 75% |
| Credit floor | 620 decision score on wholesale conventional | 620; 680 on the no-MI lane |
| Mortgage insurance | Required above 80% LTV (no-MI cash-out lane excepted) | Not needed at 80% or less; no-MI lane reaches 89.99% |
| Occupancy | Primary, second home or investment, each with its own cap | Same three; occupancy sets the leverage |
| Seasoning | None on a purchase | First loan 12+ months old; 6 months on title |
| Documentation | PAL treated as borrowed funds, documented | Appraisal; payoff of existing liens |
| Call risk | PAL lender can demand repayment | No market-linked trigger |
Two notes on that table. First, the 97% figure applies on a fixed rate when at least one borrower is a first-time buyer. Second, the 89.99% no-MI lane is narrow: thirty-year fixed, primary residence, conforming balance, a 680 score, a 50% ratio ceiling and its own six months of seasoning. In Texas, a cash-out on a homestead is capped at 80% of the home’s value by the state constitution, and that lane is not written there.
If you want the cash-out side in more detail, Lendmire’s cash-out refinance programs page lays out the structures.
How a PAL Gets Sized on a Purchase
The PAL lender sizes the line. The mortgage lender then decides whether the money counts. These are two separate reviews.
Start with the mortgage side. The Fannie Mae Selling Guide accepts borrowed funds secured by an asset as a source for the down payment, closing costs and reserves. The reason it gives is that the funds represent a return of equity. The guide’s list of eligible collateral is broader than what a PAL usually pledges, and includes savings accounts, CDs, stocks, bonds and 401(k) accounts. A PAL, as described earlier, is secured by holdings in a taxable account, and a specific brokerage’s PAL page may limit its own collateral to taxable, non-retirement holdings. That is a difference between the guide’s list and one product’s terms, not a conflict.
Next, the payment. The guide says monthly payments on secured loans count as debt. When the loan is secured by the borrower’s financial assets, though, the payment does not have to be counted as long-term debt. That helps your debt ratio.
It does not mean you owe nothing. The balance is real, and interest-only lines still cost money every month.
Then the reserves. If the same portfolio also counts toward your reserves, the lender reduces its value by the loan proceeds and related fees. You cannot spend the same stock twice.
Here is a picture of how it plays out. Say you are buying a one-unit primary residence with a 5% down payment on a conventional loan. You draw on a PAL for that 5% and the closing costs. The mortgage still follows the 95% LTV cap and the mortgage insurance rules. The PAL draw does not raise your mortgage limit. It only changes where your cash came from. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
One more point on the purchase side. Large deposits needed to close must be documented as coming from an acceptable source. A PAL draw leaves a paper trail you will want ready. Whether PAL funds can count toward a specific program’s minimum borrower contribution depends on the program. Ask your loan officer before you assume it does.
How a Cash-Out Refinance Gets Sized
The cap is a percentage of appraised value, minus what you already owe. On a one-unit primary residence the conventional cap is 80%. On a two- to four-unit primary residence, a second home or an investment property it is 75%. Occupancy sets the leverage, so a second home is not shut out. It simply sits at the lower figure.
Picture a home appraised at a round number, with a current mortgage at 50% of that value. The 80% cap leaves a 30-point gap between what you owe and what the lender can lend. Financed closing costs come out of that gap first. What remains is your cash, so it ends up smaller than the headline cap suggests.
Seasoning rules apply too. The first mortgage being paid off must be at least 12 months old, counted from note date to note date. A borrower must have been on title for 6 months. Exceptions exist for delayed financing, inheritance and legal awards. A loan with no outstanding first lien is treated as cash-out under both the Fannie Mae Selling Guide and the Freddie Mac Guide. The Freddie Mac definition adds that a cash-out refinance has no specific restrictions on the use of proceeds.
Credit works the way it does on a purchase. The wholesale conventional programs start at a 620 decision score. The automated finding governs most files, with a total ratio ceiling of 50%. A manually underwritten loan runs tighter, at 36% or 45%.
Mortgage insurance deserves a mention. Above 80% LTV it is required on the agency path, apart from the no-MI wholesale lane described above. You can request cancellation at 80% of the original value. The servicer must end it automatically at 78%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
When a PAL on a Purchase Is the Better Fit
A PAL tends to fit a buyer who already holds a sizable taxable portfolio and does not want to sell it. Selling can trigger a tax bill and takes you out of the market. Borrowing against the holdings keeps them invested.
It also fits a buyer who needs cash before they have a home to refinance. A cash-out refinance cannot help if you do not yet own the property. The PAL fills that gap.
A PAL has one more practical edge. It does not need an appraisal or a mortgage closing, and it does not touch your first mortgage.
The trade-offs are real, though. Here is where files deserve a close look:
- The line can be called. The Investor.gov alert explains that if your securities fall too far, you receive a maintenance call. You must add collateral or repay within a set period, typically two or three days.
- The line may be uncommitted. Some firms disclose that they may demand full repayment at any time, for any reason. A PAL used for a down payment can be called after you close.
- The interest floats. The Federal Reserve note describes variable pricing and interest-only payments. The balance does not shrink on its own.
- A forced sale has tax consequences. If you must sell to meet a call, the sale can create a taxable event. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
- Collateral may be limited. Concentrated positions, low-priced stocks and leveraged funds may not qualify.
The deeper issue is timing. A market drop can hit your portfolio in the same stretch that you have just taken on a mortgage. That is a bad moment to meet a call. A buyer with a thin cushion should size the draw conservatively, or skip the PAL.
When a Cash-Out Refinance Is the Better Fit
A cash-out refinance fits an owner with real equity who wants a stable source of cash. It suits someone who values a fixed structure over a line that can change.
The first benefit is that no market event triggers it. Your home does not get a margin call. As long as you make the payments, the loan stays in place. For a large, planned expense such as a renovation or paying off other debt, that stability matters.
The second benefit is that you do not need a portfolio at all. Many owners hold most of their wealth in the house. A cash-out reaches that equity directly.
The third benefit is flexibility on use. The cash can go toward whatever you need, without a restriction on use of proceeds.
The costs are also real:
1. You reset the loan. A new first mortgage replaces the old one. If your current loan has features you like, you give them up.
2. Closing costs reduce your cash. Those costs are built into the balance or paid at closing, and they shrink what reaches you.
3. Leverage rises. You owe more against the home after the closing than before.
4. Seasoning can block you. A recent purchase or a recently refinanced loan may not meet the 12-month and 6-month tests.
5. Mortgage insurance can enter at higher leverage, except on the no-MI wholesale lane, so the cheaper path usually stays at or under 80%.
If your home is owned free and clear, any new loan against it is a cash-out. That is true even if you only want a modest sum.
Ask for the cash you need, not the maximum the cap allows. A smaller draw leaves more equity untouched and keeps you clear of the leverage line where mortgage insurance returns.
What Happens When You Pay Off a PAL With a Refinance
This is the case many borrowers do not see coming. You buy with a PAL, and later you refinance to pay it off. Which side of the line does that fall on?
A refinance pays off the existing first mortgage, the closing costs and a purchase-money second lien, with only incidental cash back. A PAL is secured by your portfolio, not your home, so it is not one of those liens. Paying it off with a new mortgage therefore typically moves the loan onto the cash-out side, and the lender confirms how your file is classified. That matters because the cash-out cap is 80% on a one-unit primary residence, not 95%.
So plan the exit before you draw. If you expect to refinance a PAL into a mortgage, check your equity against the lower cap first. You also need to clear seasoning if a mortgage already sits on the home. The gap between the PAL draw and the payoff is also when call risk is highest, because you hold both obligations at once.
Key Terms Defined
Pledged asset line (PAL): A revolving line of credit secured by a taxable investment portfolio. The lender sets the limit.
Advance rate: The share of each pledged holding’s value that the lender will lend against.
Maintenance call: A demand to add collateral or repay when your portfolio falls too far in value.
Loan-to-value (LTV): The loan balance as a percentage of the home’s appraised value or price.
Cash-out refinance: A new first mortgage that pays off the old one and gives you the leftover as cash.
Limited cash-out (rate-and-term) refinance: A refinance that pays off the existing loan and costs, with only incidental cash back.
Seasoning: The waiting period a loan or ownership must meet before a refinance qualifies.
The Verdict
Neither option is better in general. They solve different problems.
Pick the PAL route when you are buying, you hold a large taxable portfolio, and you can absorb a market drop without a forced sale. Keep the draw modest. Plan how you will repay it.
Pick the cash-out route when you already own the home, you have equity, and you want cash that nothing in the market can recall. Keep the request modest too, so the leverage stays low.
A third path is worth mentioning. Some buyers use no borrowing for the down payment and keep the portfolio untouched. If neither a PAL nor a cash-out feels comfortable, that choice is a fair one.
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. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Frequently Asked Questions
Is paying off a PAL with a refinance a cash-out refinance?
Usually, yes. A PAL is secured by your portfolio, not your home, so it does not fit the debts a rate-and-term refinance can pay off. The lender confirms the classification for your file. If the new loan is a cash-out, the 80% cap on a one-unit primary residence applies.
Can I use PAL money for a down payment?
Often, yes. The Fannie Mae Selling Guide accepts borrowed funds secured by an asset for the down payment, closing costs and reserves. The lender documents the line and the draw. Whether it counts toward a specific program’s minimum contribution depends on the program, so ask your loan officer first.
Does a PAL payment count against my debt ratio?
It may not. When the loan is secured by financial assets, the guide says the payment does not have to be counted as long-term debt. The balance is still debt you owe, and the interest still costs you money each month.
What is the most a cash-out refinance can lend?
On a conventional loan, 80% of appraised value on a one-unit primary residence, minus everything you owe. Two- to four-unit primary residences, second homes and investment properties sit at 75%. Financed costs reduce the cash you receive. A narrow wholesale lane reaches 89.99% with no mortgage insurance at a 680 score, on a thirty-year fixed primary residence, subject to lender guidelines.
Can a PAL be taken away after I close on a home?
It can. If your portfolio falls too far, you may face a maintenance call and a short window to add collateral or repay. Some firms also disclose that the line is uncommitted. A cash-out mortgage has no market-linked trigger of this kind.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. 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
2. Fannie Mae Selling Guide, Borrowed Funds Secured by an Asset
3. Fannie Mae Selling Guide, Limited Cash-Out Refinance Transactions
4. Freddie Mac Guide, Section 4301.5
5. Investor.gov alert on securities-based lines of credit
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 to Retitle an Inherited 2-4 Unit for a Cash-Out Refinance · How Much a Cash-Out Refinance Lends Versus a Personal Loan · How Much Overtime Income a Cash-Out Refinance Lender Will Count
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.