The Quick Read: A conventional cash-out refinance replaces your current first mortgage with a larger new one, and you keep the difference as cash. On a one-unit primary residence, the new loan generally tops out at 80% of the appraised value. The first mortgage you are paying off must be at least 12 months old, and every figure here is subject to lender guidelines and full file review.
Key Takeaways
- A cash-out refinance is one new first mortgage, not a second loan stacked behind the old one.
- Leverage caps at 80% on a one-unit primary residence and 75% on two- to four-unit primary residences.
- Seasoning applies: 12 months on the loan being paid off and 6 months on title, with exceptions.
- The appraisal sets your ceiling. A low value shrinks the cash.
- Your payment may rise and your loan clock resets, so weigh the cost of replacing a loan you already like.
What Is a Conventional Cash-Out Refinance?
It is a mortgage with no restrictions on how you use the proceeds.
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: 7.40% as of October 15, 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.
Here is the picture. You owe a balance on your current first mortgage. The new loan pays that off, pays any closing costs you choose to finance, and sends the rest to you. Fannie Mae’s Selling Guide lets the new loan also retire older second liens, and it allows a new first mortgage on a home you own free and clear.
It is not a second mortgage. A home equity loan or HELOC sits behind your first mortgage and adds a second payment. A cash-out refinance leaves you with one loan and one payment.
It also differs from a rate-and-term refinance, which is a refinance that swaps your loan without taking meaningful cash. That lane returns only incidental cash and allows higher leverage, up to 95% on a one-unit primary residence. Cash-out is capped lower and priced differently.
You can explore Lendmire’s cash-out refinance programs to see how the wholesale options line up.
How Much Cash Can You Actually Get?
The cash is your new loan amount minus the old payoff, minus any costs you roll in. The appraisal drives the whole result. Loan-to-value (LTV) is the new loan divided by the appraised value, so the value sets the ceiling.
Run it in percentages. Say a home appraises at 100 units of value. At the 80% cap, the new loan can be up to 80 units. If your payoff and financed costs eat 60 of those, you net about 20. If the appraisal comes in 5% lower, the cap drops to 76 units of the original, and your cash shrinks by about four units. Cash is the thin slice at the end, so small value swings hit it hard.
| Property and use | Cash-out LTV cap |
|---|---|
| One-unit primary residence | 80% |
| Two- to four-unit primary residence | 75% |
Occupancy decides leverage, so second homes and investment property sit at the same 75% cap. The Fannie Mae Eligibility Matrix publishes these caps.
Across the wholesale programs placed through Lendmire, one separate lane goes higher. It reaches 89.99% LTV with no mortgage insurance, which makes it the exception to the usual insurance rule below. It needs a 680 score, a 50% ratio ceiling, a thirty-year fixed rate, a primary residence and a conforming balance, plus its own six months of seasoning. Not every lender offers it, and it is not written in Texas. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Mortgage insurance matters at this point. On conventional loans it is generally required above 80% LTV, and a standard 80% cash-out avoids it. Where it does apply, you can ask to cancel at 80% of original value with good payment history, and the servicer must end it automatically at 78%. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Who Qualifies?
Five things decide the outcome: equity, credit, debt load, seasoning, and occupancy and property type.
Credit and ratios. The wholesale conventional programs start at a 620 decision score. Most files run through an automated underwriting system, which sets the verdict. The total debt-to-income ratio (DTI), meaning your monthly debts divided by gross monthly income, tops out at 50% on automated files. Manual underwriting uses 36% or 45% with extra score and reserve requirements. Fannie Mae’s DTI rules note that cash-out files can face a lower automated maximum. Debts you pay off at closing can often come out of the ratio.
Seasoning. Seasoning is the waiting period between events. The loan you are paying off must be at least 12 months old, counted note date to note date. At least one borrower must have been on title for six months. Exceptions exist for inheritance, legal awards and related-party transfers.
Occupancy. On a primary residence, every borrower on the loan must occupy the home.
Credit events. 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. Documented extenuating circumstances can shorten them.
Loan size. The loan has to fit within the conforming limit for your county. The FHFA publishes those limits by county. Above them, jumbo programs take over with different rules.
Agency caps are the ceiling, not a promise. Individual lenders can set tighter overlays on score, leverage or reserves, so two lenders can answer the same file differently. That is one reason a broker shops several. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
The Step-by-Step Process
1. Check the gates. Confirm 12 months on the existing loan, six months on title, and the property and occupancy type.
2. Estimate the cash. Use your best guess of value, apply the LTV cap, and subtract your payoff and costs.
3. Apply and get your Loan Estimate. This form lays out the loan terms and costs. Compare it line by line across lenders.
4. Underwriting. The lender pulls credit, verifies income and assets, and runs the file through automated underwriting. Expect requests for documents.
5. Appraisal. An appraiser sets the value. If it lands low, you can take less cash, bring the loan down to fit, or pause.
6. Review the Closing Disclosure. You receive it at least three business days before closing. Check that it matches the Loan Estimate.
7. Sign, then wait out the rescission period. On a primary residence, you have three business days after signing to cancel. Funds typically go out once that window passes. The right can be waived only for a bona fide personal financial emergency, per the CFPB.
That rescission right covers the primary home. Do not assume it applies to a second home or rental.
Variations and Where the Rules Bend
The general rule is 80%, 12 months and six months. Here is where it breaks.
Delayed financing. Bought your home with cash? Fannie Mae allows a refinance that takes equity out without waiting out the normal seasoning. The original purchase has to be arm’s-length, and you must document where the purchase funds came from. If the purchase used a loan on another asset, the settlement statement must show it was repaid.
Inherited homes and legal awards. These can waive the six-month title wait.
Delinquent property taxes. Taxes more than 60 days past due can be rolled into the new loan, with an escrow account required, subject to applicable law.
Student loan payoffs. Fannie Mae waives its cash-out price adjustment when proceeds pay off student loans and delivery requirements are met.
Manufactured homes. Single-width manufactured homes are limited to purchase and limited cash-out refinances.
Ineligible structures. Fannie Mae excludes cash-out on loans with a temporary rate buydown and loans that pay off an installment land contract. A borrower who could pay off a PACE loan but chooses not to is also excluded. The current Guide governs, so confirm before relying on the list.
Texas. A cash-out on a Texas homestead is capped by the state constitution at the agency figure, and the 89.99% wholesale lane is not written there. State-specific rules can apply elsewhere too.
How Pricing Works (Without the Sticker Shock)
Cash-out loans carry loan-level price adjustments, or LLPAs. They rise with higher LTV and lower credit scores, and they stack on top of other adjustments. You will not see them as a separate line labeled “LLPA.” They show up in the terms on your Loan Estimate. That is why pricing is more than just your interest rate.
Closing costs can be financed into the loan, as long as the total stays within the LTV cap. Financing them raises your balance. Any “no-cost” refinance you see advertised simply folds the costs into the rate or the balance. They do not disappear.
Is It Worth It? The Decision in Practice
Start with what you will do with the money. The CFPB’s research found paying off other debts was the most common use, with home repairs second. Both can make sense. But the CFPB also warns that using mortgage debt to pay non-mortgage debt can raise foreclosure risk, because credit card balances become debt secured by your house.
Then test three things.
Keep or replace? A cash-out refinance replaces your whole first mortgage. Your rate and terms change on the entire balance, not just the new cash. If your current loan is one you like, a second-lien product may leave it alone. The tradeoff is a second payment.
Payment and term. The CFPB’s home equity guide notes that a cash-out refinance may stretch your payoff timeline and may raise your monthly payment, since the new loan is larger. A lower rate does not guarantee a lower payment.
Break-even. Costs add to your balance or come out of your pocket. Ask how long you will keep the loan, and whether the cash earns its cost.
| Option | Structure | Payments |
|---|---|---|
| Cash-out refinance | Replaces first mortgage | One |
| Home equity loan | Second lien, lump sum | Two |
| HELOC | Second lien, credit line | Two |
None of these lets you borrow 100% of your equity.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Red Flags: When Not to Do It
- You plan to run balances back up on the cards you just paid off.
- The payment only works if nothing goes wrong.
- You will move soon, before the costs pay back.
- Your current loan is one you would hate to lose.
- The cash covers a lifestyle gap rather than a one-time need.
Documents to Gather
Expect to provide recent pay stubs or other income documents, bank statements, your current mortgage statement, homeowners insurance, and identification. Self-employed borrowers should expect to document income over a longer period. Ask your loan officer for the exact list, since requirements vary by file.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
Seasoning: The waiting period required on your existing loan and your time on title.
LLPA: A risk-based pricing adjustment applied to the loan, built into its terms.
DTI: Your total monthly debts divided by your gross monthly income.
Rescission: The three-business-day right to cancel a refinance on your primary home.
Frequently Asked Questions
How soon after buying can I do a cash-out refinance?
Usually after six months on title, and only if the loan being paid off is at least 12 months old. Paid cash for the home? Delayed financing may let you skip the wait if you meet its requirements. Inheritance and legal awards also carry exceptions.
How much of my equity can I take?
On a one-unit primary residence, the new loan generally caps at 80% of appraised value. Two- to four-unit primary residences cap at 75%. You never reach 100% of your equity.
What happens if the appraisal comes in low?
The LTV cap applies to the lower value, so your maximum loan and your cash both shrink. You can bring the loan down to fit the new value, or pause and revisit later. Your payoff does not change.
Is a cash-out refinance a second mortgage?
No. It replaces your first mortgage with one new loan.
Can I cancel after signing?
On a primary residence, yes, within three business days. It generally applies to refinances and home equity loans on the principal dwelling, not to purchase loans.
Next Steps
Pull your current mortgage statement, note when the loan started, and estimate your home’s value. Then compare the cash you would net against what you would give up in your current loan. 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. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
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.
For the program’s current guidelines, see conventional loan programs.
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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. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
4. FHFA
5. CFPB, Waiving the Right of Rescission
7. CFPB Older Americans home equity guide
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is a Conventional Cash-Out Refinance Worth It for Your Home? · Conventional Cash-Out Refinance Documents for a Primary Home · Conventional Cash-Out Refinance for Big Home Projects: When It Pays
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
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.