The Quick Read: Your maximum new loan is the program’s LTV cap times the appraised value. Your cash is what is left after the payoff, other liens and financed costs come out of that maximum. The cap limits the whole loan, not just the equity you take. Figures here are subject to lender guidelines and full file review.
- Two-line formula: maximum loan = cap × appraised value; cash = maximum loan − payoff − other liens − financed costs.
- Value drives everything. A lower appraisal shrinks your cash faster than most borrowers expect.
- Occupancy and unit count set the cap. A one-unit primary residence gets the highest conventional cap.
- Build in a buffer. A file sized right at the cap has no room for a value miss.
- Time tests come first. Seasoning rules can block a cash-out before LTV matters.
What Does Max LTV Actually Measure?
LTV stands for loan-to-value. It is the new loan amount divided by the appraised value of the home. The appraisal is the denominator, so you do not control it, and the lender does not use your own estimate.
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.
Say a program caps cash-out at 80%. The new loan can be no larger than 80% of the appraised value. You keep at least 20% of the value as equity. That equity cushion is the point of the cap.
Many homeowners read the cap as “the equity I can take.” That reading is a misunderstanding. The cap applies to the total new loan. Your current mortgage balance, any other liens and any financed costs all count toward it before you see a dollar of cash.
A second term shows up on some files: CLTV, or combined loan-to-value. It adds any second liens that stay in place to the new first mortgage. If you keep a home equity line open behind the new loan, CLTV is the test that catches it.
How Is the Maximum Cash Worked Out, Step by Step?
Start with the transaction type, then build the payoff stack, then subtract it from the maximum loan. Each step below has its own mini-calculation. Work them in order, because a failed early step makes the later math moot.
Step 1: Classify the loan. A limited cash-out (often called rate-and-term) refinance pays off the first mortgage and closing costs, with only small incidental cash back. A full cash-out refinance lets you take real money from equity. The classification sets the cap. Cash back beyond the limited cash-out allowance moves the file into full cash-out, with a lower LTV cap.
Step 2: Run the time tests. On a conventional cash-out, the first mortgage you are paying off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for 6 months. Exceptions exist for delayed financing after a cash purchase, inheritance and legal awards. These tests are covered in more detail below.
Step 3: Estimate value. The appraisal is the ceiling for sizing. Use a conservative number for planning, not the one you hope for.
Step 4: Apply the cap. Multiply value by the cap for your occupancy and unit count. That is your maximum loan.
Step 5: Build the payoff stack. Add the first mortgage payoff (including interest accrued to the payoff date), any other lien you must pay, and any closing costs you plan to finance.
Step 6: Subtract. Maximum loan minus the payoff stack is your maximum cash. Financed costs reduce cash dollar for dollar, because they count toward the loan.
Step 7: Check the borrower side. The lender then reviews income, debts and credit at the new balance. Across the wholesale programs Lendmire places files with, the conventional lanes start at a 620 decision score, and the automated finding governs most files, with a total ratio ceiling of 50%. A bigger balance changes your debt-to-income ratio, so a deal that fits the LTV can still fail here.
A Full Worked Example (in Percentages, Not Dollars)
Run the numbers on a one-unit primary residence, using modeled assumptions. These inputs are illustrations, not market data. Every figure below is a percent of the appraised value.
- Appraised value: 100%.
- Cap for a one-unit primary residence on the conventional cash-out: 80%.
- Maximum loan: 80%.
- First mortgage payoff, including accrued interest: 52%.
- Second lien paid off at closing: 5%.
- Financed closing costs: 2%.
- Maximum cash: 80 − 52 − 5 − 2 = 21%.
So a homeowner with 48% equity on paper takes out roughly 21% of the home’s value. The rest of the “equity” is the 20% cushion the cap protects, plus the liens and costs that come first.
Now change only the appraisal. Say it comes in 5% below your estimate. Value drops to 95% of what you expected. The cap is still 80%, so the maximum loan falls to 76% of your original estimate. The payoff stack does not move, since you still owe the same balances.
- Maximum loan: 76%.
- Payoff stack: 59%.
- Maximum cash: 76 − 59 = 17%.
A 5% appraisal miss cut your cash from 21% to 17% of the original value. That is nearly a fifth of your cash gone from one number you did not control. Appraisal sensitivity is why sizing needs a buffer.
Change the property type instead. On a two- to four-unit principal residence, the conventional cash-out cap is 75%. With the same 59% stack, the maximum cash would be 75 − 59 = 16%. Same equity, less cash, because the cap is lower.
How Do You Work Backward from the Cash You Need?
Reverse-solving tells you the value required for your goal. The formula is: required value = (payoff + other liens + financed costs + cash wanted) ÷ cap.
Take the same 59% stack, and say your goal is cash equal to 25% of the value you expect. Add them: 59 + 25 = 84. Divide by the 80% cap: 84 ÷ 0.80 = 105. The home would need to appraise at 105% of your estimate. That is a stretch.
When the required value is above your realistic estimate, the goal does not fit. Your options are then to take less cash, pay down the stack first, choose a different product, or wait for value to rise. The next sections cover each.
Which Caps Apply? A Table for These Programs
Occupancy and unit count set leverage. A cash-out can be written on a primary residence, a second home or an investment property, and the cap changes with each. Here are the figures for the conventional programs Lendmire places, subject to lender guidelines.
| Situation | Max LTV | Note |
|---|---|---|
| One-unit primary residence | 80% | Standard conventional cash-out |
| Two- to four-unit primary residence | 75% | Lower cap for multiple units |
| Second home | 75% | Occupancy sets leverage |
| Investment property | 75% | Separate from owner-occupied caps |
| Texas homestead cash-out | 80% | State constitution cap |
| Wholesale no-MI lane | 89.99% | 680 score, 50% ratio, 30-year fixed |
The last row is narrow. That wholesale lane reaches 89.99% LTV with no mortgage insurance. It requires a primary residence, a conforming loan balance, a 680 score, a 50% ratio, a thirty-year fixed loan and its own six months of seasoning. It is not written in Texas, where the homestead cap above applies instead. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Fannie Mae publishes its own caps by occupancy and unit count in its Eligibility Matrix. Lender overlays can sit below those figures.
FHA and VA each set separate cash-out ceilings. FHA’s standard cash-out is for owner-occupied principal residences, and VA’s cash-out comes through a private lender, with a funding fee that may be due at closing, per VA.gov. The VA funding fee can be financed, and a financed fee counts as part of the loan amount in the LTV test. Confirm each program’s current ceiling before you size.
The FHA Streamline and the VA IRRRL are for existing government loans. They are not sizing routes for cash.
What Shrinks Your Cash?
Anything that adds to the payoff stack or lowers value cuts your cash. Check each item below before you trust a number.
| Item | How it hits your cash |
|---|---|
| Second lien paid off | Subtracts its full balance |
| Payoff interest | Adds days of interest to the payoff |
| Financed closing costs | Count toward the loan, so cash falls |
| Low appraisal | Lowers the maximum loan itself |
| Lower cap (unit count) | Same equity, smaller maximum loan |
Payoff interest is easy to miss. Your payoff is the balance plus interest accrued through the payoff date, so it runs a little higher than the balance on your last statement.
On second liens, the choice matters. If you pay one off with the new loan, it comes out of your cash. If it stays in place, it counts toward CLTV, and the lender must allow it. Either way, the lien takes room under the cap.
A related point: rolling closing costs into the loan is not the same as cash-out. It is a financed cost, and it still uses up room. Terms like “no-cost” refinance are marketing language. The costs are still there, built into the loan terms or the balance.
Third-party costs apply to the whole new balance. Fannie Mae also adds a loan-level price adjustment on many cash-outs. That is a cost that depends on LTV and credit score, and the schedule sits in the LLPA Matrix. Higher LTV and a lower score cost more. Your Loan Estimate shows how your costs are structured.
How Much Buffer Should You Leave Under the Cap?
Leave room. A file sized exactly at the cap breaks if the appraisal misses by a small amount, because the maximum loan drops while your payoff stack holds still.
Here is a practical way to do it. Run your sizing at your best estimate. Then run it again with value a few percent lower. If the second run still covers your payoff, liens, costs and the cash you truly need, you have a workable file. If it does not, trim the cash target.
A buffer also covers cost changes. Final figures on the Closing Disclosure can differ from early estimates, and financed costs come straight out of your cash.
Mortgage insurance is one more reason to watch the cap. On the agency path it is required above 80% LTV, with the one exception of the wholesale no-MI cash-out lane described above. It can be canceled on request at 80% of the original value with a good payment history, no subordinate liens and no decline in value. The servicer must end it automatically at 78%, under the Homeowners Protection Act.
Where Does the General Rule Break?
The formula holds, but several situations change the inputs or block the loan before sizing starts.
Seasoning. Freddie Mac’s Seller/Servicer Guide section 4301.5 covers the six-month title rule, the primary-residence occupancy requirement on its cash-out loans, and rules for paying off a first lien. A recent purchase or a young first mortgage can block a conventional cash-out. A delayed financing exception can apply after a cash purchase.
Free-and-clear homes. With no first mortgage, the payoff stack is small and the cap does most of the work. Freddie Mac has its own subsection for homes owned free and clear.
Co-owner buyout. Under a written agreement, both agencies treat buying out a co-owner as a limited cash-out transaction. It uses the higher limited cash-out leverage, not the full cash-out cap.
Limited cash-out cash back. Fannie Mae allows the lesser of 2% of the new loan amount or $2,000. Freddie Mac allows the greater of 1% of the new loan amount or $2,000. Small cash back is fine inside a limited cash-out, but go above the allowance and the file is a full cash-out.
Occupancy. Freddie Mac requires all borrowers to occupy a primary residence on its cash-out loans, and FHA’s standard cash-out is for principal residences. Conventional second homes and investment properties follow the lower caps in the table above.
Property type. Some manufactured homes face separate cash-out caps, and single-width units are not eligible on a principal residence under Fannie Mae’s product matrix. Confirm the property’s eligibility before sizing.
PACE loans. Fannie Mae’s cash-out rules make a borrower ineligible for cash-out if a PACE loan stays in place despite enough equity to pay it off.
Student loan cash-out. A Fannie Mae cash-out used to pay off student loans can qualify for a waiver of the price adjustment, but the standard cash-out LTV limits still apply.
Texas. On a Texas homestead, the state constitution caps a cash-out at 80% of the home’s value. State law elsewhere can also change treatment. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Larger loans. Loan limits apply on top of the LTV cap. Above the conforming limit, jumbo lanes take over. Those lanes use a 660 decision score, leverage to 90%, loan amounts to $5,000,000 and a 50% ratio ceiling on the fixed lanes. They are subject to lender guidelines.
What Happens When the Cap Blocks Your Goal?
When your cash goal exceeds the cap, you have five realistic paths. Pick based on how much cash you need and why.
1. Take less cash. Resize to the maximum your numbers support. Often this is enough for the actual project or payoff.
2. Pay down the stack. Clearing a second lien from other funds opens room under the cap.
3. Check another occupancy or program fit. The caps differ by property use and unit count. Lendmire’s cash-out refinance programs page lays out the options for owner-occupied homes.
4. Use a different product. A home equity loan or line leaves your first mortgage in place. That helps when the first mortgage has terms you want to keep, since a cash-out changes the terms on the whole balance, not only the cash slice.
5. Wait. Value growth or loan paydown raises equity. Seasoning also fixes some time-based blocks.
Before you commit, weigh the cost. A new, larger loan can raise your payment and your debt-to-income ratio. A cash-out also resets the terms on the full balance.
One more consumer-side fact: cash-out borrowers often use proceeds to pay other debts or fund repairs, according to the Consumer Financial Protection Bureau. The same research found an early jump in credit scores, then a gradual slide back.
Key Terms Defined
LTV (loan-to-value): The new loan amount divided by the home’s appraised value.
CLTV (combined loan-to-value): All loans secured by the home, including second liens that stay in place, divided by value.
Payoff stack: The first mortgage payoff, other liens being paid and any financed costs, added together.
Financed costs: Closing costs added to the loan balance rather than paid in cash. They count toward LTV.
Seasoning: The waiting period tied to how long you have owned the home or held the loan being paid off.
Limited cash-out: A refinance that pays off the first mortgage and costs, with only small cash back.
What to Check Before You Apply
Use this list to test your sizing before you talk to a lender.
- Confirm your occupancy and unit count, since they set the cap.
- Pull your current payoff statement and add the interest to the payoff date.
- List every lien on the home, including home equity lines.
- Check your title date and the age of your first mortgage against the seasoning tests.
- Run your numbers at a lower value to see if the file survives a miss.
- Estimate how a larger balance changes your total monthly debts against income.
- Decide how much cash you need, not just how much you can get.
Next Step
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. Lendmire is a mortgage broker, not a lender, and any program is subject to lender guidelines and a full file review. Nothing here is a commitment to lend.
Frequently Asked Questions
Does the max LTV cap equal the equity I can take?
No. The cap limits the total new loan, not your cash. Your first mortgage payoff, other liens and financed costs come out of the maximum loan first. Whatever remains is your cash. On a one-unit primary residence with an 80% cap, your cash is the 80% maximum loan minus that payoff stack, so it is always smaller than the equity you hold.
How much does a low appraisal cut my cash?
More than the percentage miss suggests. Your payoff stack does not change, but the maximum loan shrinks. In the worked example above, a 5% miss cut cash from 21% to 17% of the original value, nearly a fifth. A buffer under the cap protects you from this.
Do closing costs count against the cap?
Yes, when you finance them. A financed cost raises the loan amount, which raises LTV and lowers your cash. Costs paid out of pocket do not count toward the loan, though they reduce the money you have on hand.
Can I have a cash-out if I just bought the home?
Often not on a conventional loan, because of seasoning tests. The first mortgage being paid off generally must be 12 months old, and a borrower on title for six months. Delayed financing after a cash purchase, inheritance and legal awards are named exceptions. Confirm the details with your loan officer.
Is mortgage insurance required at the cap?
It depends on the LTV. On the agency path, mortgage insurance is required above 80% LTV, except in the wholesale no-MI cash-out lane that reaches 89.99%. At an 80% cash-out, it is not triggered by the cap itself. Where it applies, it can be canceled at 80% of the original value on request and ends automatically at 78%.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency 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. Fannie Mae Eligibility Matrix
2. VA.gov, Cash-Out Refinance Loan
4. Freddie Mac Seller/Servicer Guide, Section 4301.5
5. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
6. Consumer Financial Protection Bureau
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 a Cash-Out Refinance Works for a Big Expense · How a No-Cost Cash-Out Refinance Works · How the Cash-Back Line Works on a Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- 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.