The Quick Read: Usually a cash-out refinance, if you can document income and carry a monthly payment. It is a loan with a known structure, and the total cost is easier to see up front. A shared equity agreement needs no monthly payment, but you repay a lump sum tied to your home’s future value, and that amount is hard to predict. It fits a narrow group of homeowners who cannot or will not take on a payment.
What Is the Real Difference Between the Two?
A cash-out refinance replaces your current first mortgage with a larger one and pays you the difference. A shared equity agreement gives you cash now in exchange for a share of your home’s future value. One is debt with a payment. The other is a deferred, variable bill.
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: 7.32% as of October 22, 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 cash-out route is a mortgage. You have a rate, a term, a balance that steps up, and a monthly payment. Your equity stays yours. The shared equity route, also sold as a home equity contract or home equity investment, usually has no monthly payment. A provider advances money, records a lien, and collects at the end of the term, at a sale, or at another trigger.
Neither is free money. The cash-out costs you interest and closing costs. The shared equity agreement costs you a slice of appreciation, and sometimes more than that, depending on how the contract is built.
Which One Costs More Over Time?
Shared equity usually costs more in total than a standard loan. The Consumer Financial Protection Bureau says the total a consumer pays will often be higher for a home equity contract than for alternatives such as a HELOC. A cash-out refinance sits in the same loan family, so the comparison points the same direction.
The reason is mechanical. A loan charges interest on a balance you know. A shared equity contract charges against a value you do not know yet. If your home appreciates, the provider’s share grows with it. The CFPB’s review of consumer complaints turned up surprise at repayment size, misleading rate caps, valuation disputes, and a feeling that selling was the only exit.
Some contracts also use multipliers. A provider that advances cash against a small slice of your equity may claim a larger slice of the appreciation. Read that clause before anything else.
Shared equity also carries up-front fees, usually a percentage of the advance, which reduces the cash you actually receive. A cash-out refinance can finance its closing costs into the new balance, which also reduces net cash. Compare the net amount in your hand, not the headline figure.
How Does a Cash-Out Refinance Work?
A cash-out refinance pays off your existing first mortgage and any liens with a new first mortgage, then sends you the leftover equity as cash. The new loan is run through automated underwriting, appraised, and closed with a Loan Estimate and Closing Disclosure along the way.
Across the wholesale programs Lendmire places files with, the conventional cash-out envelope looks like this. Maximum leverage is 80% LTV on a one-unit principal residence, and 75% on two- to four-unit principal residences and second homes. The appraised value sets how much cash you can reach. On a thirty-year fixed primary residence at a conforming balance, one wholesale lane reaches 89.99% LTV with no mortgage insurance at a 680 score and a 50% ratio, with its own six months of seasoning. Texas homestead cash-outs are capped by the state constitution, and that lane is not written there. All of it is subject to lender guidelines and full file review.
Fannie Mae’s Selling Guide defines a cash-out as a new first mortgage that pays off existing mortgages on the same property, or a new mortgage on a home owned free and clear. It allows the proceeds for any purpose, and it allows paying off subordinate liens of any age. The new loan can also include financed closing costs and prepaids.
If you want to see how the programs compare on the equity they reach, start with Lendmire’s cash-out refinance programs.
How Does a Shared Equity Agreement Work?
You receive money up front. Usually there is no monthly payment. A lien is typically recorded on the home. Later, a single settlement comes due, based on the home’s value at that time.
The CFPB describes the repayment as generally based on value at settlement, which makes it unpredictable. Its own illustration compared a loan-style example with a contract example over ten years. The contract example showed a wide range of possible settlement amounts, and the CFPB flagged that some run to six figures. Law-firm summaries of the report cite settlement amounts growing at roughly 19.5 to 22 percent a year in the early years, which is an estimate attributed to the CFPB report, not a quote.
Underwriting is different too. Providers generally weigh equity and property value more than debt-to-income. That can help someone whose income is irregular or hard to verify. It is also why the product exists at all.
Regulatory treatment is unsettled. The CFPB’s January 2025 actions were an amicus brief, a consumer advisory, and an issue spotlight, and Mayer Brown’s summary notes that none of them is binding. Do not assume the contract comes with the same standardized disclosures a mortgage does. The disclosures vary by provider.
Side by Side
| Factor | Cash-Out Refinance | Shared Equity Agreement |
|---|---|---|
| Structure | New first mortgage | Equity share, lien recorded |
| Existing mortgage | Paid off and replaced | Stays in place |
| Monthly payment | Yes, on the larger balance | Usually none |
| What you repay | Balance plus interest | Lump sum tied to home value |
| If value rises | You keep the gain | Provider shares the gain |
| If value falls | Balance unchanged | Settlement may shrink |
| Qualification | Credit, ratios, LTV, seasoning | Equity and property value |
| Exit | Sell or pay off the loan | Sell, buy out, or refinance |
The falling-value row cuts in the shared equity agreement’s favor. The provider shares the downside. That is the one real structural advantage, and it is worth weighing if you expect flat or weak prices.
When a Cash-Out Refinance Fits Best
A cash-out refinance fits if you have stable, documentable income and want to know your cost before you sign. It also fits if you plan to stay put and want to keep all your future appreciation.
It works best when the cash has a defined use, such as a renovation, paying off higher-cost debt, or a large planned expense. You carry a payment, but the payment is bounded and the balance shrinks over time.
It is also the more natural choice when your current mortgage is not low-cost to keep. A cash-out reprices the whole balance, so the comparison is between the loan you have and the loan you would take. If you would rather leave a first mortgage alone, a different structure may serve you better. Lendmire’s piece Should You Take the Maximum Cash-Out Refinance or Leave Equity? walks through that trade. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
When a Shared Equity Agreement Fits Best
Shared equity fits if you cannot comfortably make a new payment and cannot qualify for a loan on your income. It also fits if your income is hard to verify and you have substantial equity to exchange.
It should be a considered last resort in that situation, not a first move. Ask what happens if you want to sell in two years, or want to stay for twenty. The contract’s exit terms matter more than the advance amount.
One more point. A provider’s figure for what it will advance is not the same as what you net. Fees reduce it. And the settlement is the number that decides whether the deal was good, not the advance.
What Qualifies You for a Cash-Out Refinance?
Conventional cash-out eligibility rests on a few documentable items: credit, ratios, leverage, seasoning, and occupancy. Across the wholesale conventional programs, files start at a 620 decision score, and the automated finding governs most of them, with a total ratio ceiling of 50%. Manually underwritten loans run tighter, at 36% or 45%.
Seasoning is where files get kicked back. The first mortgage being paid off must be at least 12 months old, measured note date to note date, and a borrower must have been on title for six months. Freddie Mac’s Guide also requires, for a primary residence cash-out, that all borrowers occupy the property. You cannot add a non-occupant co-borrower to carry the loan.
There are exceptions. Delayed financing covers a home bought for cash within the past six months, if the purchase was arm’s-length and the source of funds is documented. Inheritance and legal-award exceptions also exist.
Credit events matter, too. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
The Edge Cases That Change the Answer
A small cash-out can still be a full cash-out. This is the line borrowers miss. A limited cash-out, also called a rate-and-term refinance, can pay off only the first mortgage, closing costs, and a purchase-money second lien, with only incidental cash back. Fannie Mae’s announcement caps that cash back at the greater of 1% of the new loan balance or $2,000. A second lien that was not used to buy the home pushes the whole loan into cash-out, with the lower leverage and different pricing that follow.
Other cases worth checking before you apply:
- A home owned free and clear. A new conventional loan on it is still a cash-out.
- Title held in an LLC. Time held by a borrower-controlled LLC can count toward the six-month test, but a limited cash-out needs title moved into your name.
- An existing shared equity contract. A recorded contract can complicate a first-mortgage refinance. The CFPB’s complaint review lists difficulty refinancing the first mortgage. Have the payoff and subordination terms reviewed before you apply, not after.
- A second home or rental. Occupancy decides the leverage. A second home or investment property is capped at 75% on cash-outs, below the 80% for a primary residence.
- Government loans. An FHA cash-out has its own leverage cap, and a VA cash-out requires a certificate of eligibility and occupancy. If you have an existing FHA or VA loan and want no cash, the streamline lanes are separate products.
Can You Use One to Exit the Other?
Yes, and that is often the practical answer. A cash-out refinance is one way to retire a shared equity agreement. You take a new first mortgage large enough to pay the provider’s settlement, and you replace the equity share with a loan.
The sequence only works if the numbers fit. The settlement amount depends on current value, and your new loan is limited by 80% LTV on a one-unit primary residence. A contract that has grown a lot may not fit inside that leverage. The earlier you check, the more choices you keep. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Going the other way is rare. Few people swap a mortgage for an equity partner. The cash-out refinance is the usual exit, and the earlier you run it, the better.
Why Not Neither?
Sometimes the right answer is neither. If you need a modest amount and your current mortgage is one you want to keep, a home equity loan or HELOC may do the job without repricing your first lien. A reverse mortgage serves a narrow group of older homeowners. Each has its own tradeoffs, and each deserves a look before you sell a share of your home.
Questions to Ask Before You Sign Either One
For a cash-out refinance, ask how much of the closing cost is financed, what the new balance will be, and whether the payment fits your budget with taxes, insurance, and maintenance included. You will get a Loan Estimate and a Closing Disclosure. Compare them line by line.
For a shared equity agreement, ask these:
1. How is the settlement calculated, and is there a multiplier?
2. What fees come out of the advance?
3. Is there a cap, and how is it defined?
4. Can you prepay or buy out early, and at what price?
5. How are renovations treated in the valuation?
6. Who sets the value at settlement, and how do you dispute it?
7. What happens to the lien if you refinance your first mortgage?
If a provider cannot answer these in writing, that tells you something.
Frequently Asked Questions
Can I refinance my first mortgage while I have a shared equity agreement?
Often, but it takes planning. A recorded contract can complicate the file, and the CFPB’s complaint review lists difficulty refinancing as a recurring problem. Get the contract’s payoff and subordination terms in hand before you apply, since the lender will need to see them.
Does a shared equity agreement count as a loan?
Providers generally describe it as an investment, not a loan, so it is not usually reported to the credit bureaus as debt. Regulatory treatment is unsettled, though, and the CFPB has not issued a binding rule. Do not assume mortgage-style disclosures apply.
What if my home loses value?
With a cash-out refinance, your balance stays the same regardless, and you owe the full loan. With a shared equity agreement, the settlement usually tracks the home’s value, so a decline may reduce what you owe. That downside sharing is the main structural benefit of the product.
Which one is cheaper?
For most households that can carry a payment, a cash-out refinance is typically cheaper in total. The CFPB says total payments often run higher on a home equity contract than on loan alternatives. Your own result depends on appreciation, how long you hold, and the contract’s terms.
How much equity can I reach with a cash-out refinance?
On a conventional one-unit primary residence, leverage tops out at 80% LTV, and 75% on two- to four-unit homes and second homes. One wholesale lane reaches 89.99% LTV with no mortgage insurance on a thirty-year fixed at a 680 score. All figures are subject to lender guidelines and full file review.
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. The first step is a look at how much of your home’s value each option actually reaches, and what you would owe at the end.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
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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References
1. CFPB Issue Spotlight: Home Equity Contracts Market Overview
2. Fannie Mae Selling Guide B2-1.3-03 Cash-Out Refinance Transactions
3. Mayer Brown, CFPB Takes a Stance on Home Equity Contracts
5. Fannie Mae SEL-2025-08 Announcement
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 Refinance Soon After a Purchase and Clear Seasoning · Cash-Out Refinance vs HELOC to Combine a First and Second Mortgage · 20-Year vs. 15-Year Refinance for Shortening a 30-Year Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.