The Quick Read: A lender sizes your cash-out refinance by multiplying the appraised value by a maximum loan-to-value (LTV) ratio, then subtracting everything the new loan must pay off. What is left is your cash. The cap applies to the whole new loan, not to your equity. On a conventional loan for a one-unit home you live in, that cap is 80%, subject to lender guidelines and full file review.
What Does “Sizing” Mean?
Sizing is how a lender turns a home’s value into a maximum loan, and then into the cash you actually receive. The formula fits on one line: appraised value × program cap − payoff − other liens − financed costs = your cash.
Most homeowners start from the wrong end. They think, “I have this much equity, so I can take most of it.” The lender starts at the top instead. It asks how large the new loan may be, then fills that loan with what must come out first.
A cash-out refinance is a new first mortgage that pays off your old one and gives you the difference in cash. It is different from a rate-and-term refinance, which only swaps the old loan for a new one with incidental cash back. Lendmire arranges both kinds through wholesale lenders. Its cash-out refinance programs follow the same sizing logic described below.
Key Terms Defined
- Appraised value: the dollar value a licensed appraiser assigns to your home on the day of the appraisal.
- Loan-to-value (LTV): the new loan balance divided by the appraised value, shown as a percentage.
- Lien: a legal claim against your home for a debt, such as a first mortgage or a home equity loan.
- Payoff: the exact amount needed to retire an existing loan on the closing date, including interest that has built up.
- Seasoning: the minimum time you have held the home or the loan before a new cash-out is allowed.
- Gross cash versus net cash: gross is what is left under the cap before costs. Net is what lands in your account after costs.
Step 1: Where the Value Comes From
The value comes from an appraisal, and a cash-out generally needs a fresh one. Fannie Mae allows an old origination appraisal to be reused only on a limited cash-out. A cash-out needs its own.
The appraiser values your home as it stands today. Renovation plans do not count. Neither does what you paid, what the tax office says, or what a neighbor’s house sold for last month. Online estimates and assessments are planning figures only.
Age matters too. Fannie Mae’s appraisal age rules say the home must be appraised within the 4 months before the note date. An update can cover a gap, but it only confirms that value stayed the same or fell. If your home gained value, you need a new report.
Fannie Mae also has an appraisal-waiver option, called value acceptance. Its listed eligible transactions are limited cash-out refinances, not cash-outs. Do not count on a waiver for cash-out money.
Step 2: Apply the Cap
The cap depends on how you use the home and how many units it has. Across the conventional wholesale programs we place files with, a cash-out refinance is capped at 80% LTV on a one-unit principal residence. It is 75% on two- to four-unit principal residences, second homes and investment property. The Fannie Mae Eligibility Matrix lists the same split for principal residences. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
| Property and use | Conventional cash-out cap |
|---|---|
| One-unit principal residence | 80% LTV |
| Two- to four-unit principal residence | 75% LTV |
| Second home | 75% LTV |
| Investment property | 75% LTV |
Occupancy decides the leverage on a cash-out refinance, whether the property is a primary residence, a second home or a rental. The table answers it.
One wholesale lane goes further. It reaches 89.99% LTV with no mortgage insurance. It asks for a 680 score, a 50% ratio and a thirty-year fixed rate on a primary residence with a conforming balance. It carries its own six months of seasoning. In Texas, the state constitution caps a homestead cash-out at the agency figure, so that lane is not written there. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
At 80%, at least 20% of the appraised value stays in the home. That is simple arithmetic from the cap.
Step 3: Subtract the Payoffs
Payoffs come out of the ceiling first. That means your first mortgage, any second lien or home equity loan being paid off, and the interest that has built up since your last statement.
This is why your statement balance is not your payoff. The payoff statement adds per-diem interest through the closing date. A small gap between the two is normal.
Say your home appraises at a round number and you hold the 80% cap. Eighty percent of that value is your ceiling. If your first mortgage is 50% of the value and a home equity loan is 5%, those two payoffs eat 55 points of the 80. You are left with 25 points of value, before costs. Notice that you never get anywhere near “all the equity.”
A second lien that stays in place also uses up room. On FHA loans the 80% limit applies to combined debt, so a second lien left open counts against the cap.
Step 4: Subtract Financed Costs
Closing costs and prepaid items can be paid in cash at the table or rolled into the loan. Rolling them in is convenient. It also pulls them out of the same ceiling, so your net cash shrinks by the same amount.
Your Loan Estimate shows these costs before you commit, and your Closing Disclosure shows the final figures. Compare the two. Costs are never “free.” They are paid in cash, built into the balance, or built into the rate.
A Worked Example
Run the numbers on a one-unit home you live in, at the 80% cap:
1. Appraised value: 100%. 2. Maximum new loan at the cap: 80%. 3. Existing first mortgage payoff: 52%. 4. Financed costs and prepaids: 2%. 5. Net cash: 26%.
Now suppose the appraisal comes in 5% lower than you hoped. Value is 95% of the old figure. The cap now gives 76% of the original value, not 80%. The payoff has not moved, and the costs are about the same. Net cash drops from 26% to 22%.
A 5% miss in value cut the cash by roughly 15%. That is the leverage effect. The lender’s ceiling moves with the cap percentage of every dollar of value lost, but your payoff stays fixed, so the cash absorbs the whole hit.
| Appraisal result | Ceiling at 80% | Cash effect |
|---|---|---|
| On target | 80% of expected value | Full planned cash |
| Modestly low | Slightly under 80% | Cash falls faster than value |
| Significantly low | Well under 80% | Cash can disappear |
What Else Can Lower the Number
The appraisal is only the first test. The value test is separate from the borrower tests, and either can cut your cash even after the appraisal is done.
- Seasoning. On the conventional cash-out lane, the first mortgage being paid off must be at least 12 months old, counted note date to note date. A borrower must also have been on title for 6 months. Delayed financing, inheritance and legal-award exceptions exist.
- Credit. Wholesale conventional programs start at a 620 decision score, though the automated finding governs most files.
- Debt-to-income. The total ratio ceiling is 50% on automated findings. Manual underwriting is tighter, at 36% or 45% depending on reserves and score factors.
- Lender limits. A program maximum is a ceiling, not a promise. A lender can set a lower one.
A strong equity cushion does not rescue a file that fails seasoning. Eligibility timing can delay a cash-out even when the equity looks ample.
Where the General Rule Breaks
The 80% rule is the common case. These are the named exceptions.
- Limited cash-out is a different transaction. A rate-and-term refinance on a one-unit principal residence reaches 95% LTV, or 97% where the existing loan is agency-owned and a first-time-buyer program allows it. Above 95%, Fannie Mae’s limited cash-out rules add conditions: fixed-rate only, no high-balance loans, and a home all borrowers occupy. Mortgage insurance applies above 80%.
- A paid-off home is still cash-out. If you own free and clear and borrow against it, the lender treats it as a cash-out. The cash-out cap applies, not the higher cap.
- FHA. HUD cut its cash-out cap from 85% to 80% of adjusted value in Mortgagee Letter 2019-11.
- VA. The VA can go to 100% of reasonable value, but the funding fee sits inside that 100%. VA’s Circular 26-19-05 says a financed fee cannot push the loan past the property’s reasonable value. Many lenders set a lower cap of their own.
- Streamlines. The FHA Streamline and the VA IRRRL are for existing government loans. They are not cash-out products. Only minor adjustments come back to you.
- Manufactured housing. Cash-out caps are well below the one-unit figure.
- Jumbo. Above the conforming limit, the jumbo lanes take over with their own score and leverage rules.
If the Appraisal Comes In Low
Your options, in the order most borrowers try them:
1. Ask for a reconsideration of value. Send the appraiser better comparable sales, if you have them. Do not argue. Give evidence.
2. Resize the loan. Take less cash. The loan simply shrinks to fit the new ceiling.
3. Bring cash to closing. This covers the gap but defeats part of the purpose.
4. Wait. Values move, and seasoning keeps accruing.
5. Compare programs. A different program can use a different cap for the same home.
Work backward before you apply. Decide how much cash you actually need, not how much you can reach. Borrowing less than the maximum keeps more equity in the home.
Is the Cash Worth It?
Sizing tells you what you can borrow. It does not tell you whether you should. Rolling cash into a new first mortgage raises your balance and restarts the term. The CFPB notes that converting non-mortgage debt into mortgage debt puts the home at risk in a way a missed card payment does not.
Lendmire’s piece How a Lender Sizes the Cash You Get From a Cash-Out Refinance goes deeper on the final figure. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
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.
Frequently Asked Questions
Can I borrow 80% of my equity?
No. The 80% applies to your home’s value, not your equity. Your old mortgage and other liens come out of that 80% first. What remains is the cash, before closing costs.
Why is my cash lower than my online estimate?
Online values are guesses, and the appraisal is the figure that counts. The formal payoff statement, with interest built up through closing, can also differ from your statement balance. Financed costs reduce the cash further.
Does a lower appraisal cut my cash by the same amount?
It cuts it by more than you might expect. The ceiling falls by the cap percentage of the lost value, while your payoff stays the same. A modest miss can remove a large share of the planned cash.
Can an FHA Streamline or VA IRRRL give me cash?
No. Both are streamline products for existing government loans. They allow only minor adjustments, not real cash back. If you want meaningful cash, you need a cash-out program.
Does my credit affect how much I can get?
Yes, indirectly. Credit and debt-to-income do not change the value cap. They can, however, decide whether you qualify at all or push you toward a lower amount, subject to lender guidelines and full file review.
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 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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References
1. Fannie Mae Selling Guide B4-1.2-04 Appraisal Age and Use
2. Fannie Mae Value Acceptance
3. Fannie Mae Eligibility Matrix
4. Fannie Mae Selling Guide B2-1.3-02, Limited Cash-Out Refinance Transactions
5. HUD Mortgagee Letter 2019-11
7. CFPB
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 Lender Sizes the Cash You Get From a Cash-Out Refinance · How Much Cash a Lender Will Release in a Cash-Out Refinance? · Cash-Out Refinance for Homeowners Who Cashed Out Before
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
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.