The amount you can receive from a cash-out refinance depends on your home value, current mortgage balance, loan program and the maximum loan-to-value ratio allowed by the lender.
Many conventional and FHA cash-out refinances are capped at 80% loan-to-value, or LTV, for an eligible primary residence. That generally requires you to leave at least 20% equity in the home. VA guidelines can allow a higher LTV, but lender requirements may reduce the amount available.
Cash-Out Refinance Basics
| Factor |
How It Affects Your Cash-Out Amount |
| Home value |
The lender uses an accepted appraisal or valuation to calculate the maximum loan amount. |
| Maximum LTV |
The loan program and lender determine how much of the property value can be financed. |
| Mortgage payoff |
The existing mortgage must be paid from the new loan before cash is distributed. |
| Other property liens |
A home equity loan, HELOC or other lien may need to be paid off or included in combined loan-to-value calculations. |
| Closing costs and fees |
Costs paid from the loan proceeds reduce the cash you receive. |
| Borrower qualifications |
Credit, income, debts and loan limits can restrict the approved loan amount even when the property supports more. |
How Does the 80% Cash-Out Refinance Rule Work?
The 80% rule means the new mortgage generally cannot exceed 80% of the home’s accepted value. The remaining 20% stays in the property as equity.
The basic calculation is:
Home value × maximum LTV = maximum new loan amount
You then subtract the existing mortgage payoff, other liens and costs paid from the loan proceeds:
Maximum new loan amount − mortgage payoff − other liens − financed costs = estimated cash proceeds
For example, an 80% LTV limit on a $400,000 home would allow a maximum new mortgage of $320,000. If you owe $240,000, the difference before closing costs and other deductions would be $80,000.
The 80% limit is common, but it is not universal. The maximum depends on the loan program, occupancy, property type and lender requirements.
How Much Can You Cash Out With a Conventional Refinance?
Fannie Mae and Freddie Mac generally permit a maximum 80% LTV for a conventional cash-out refinance secured by a one-unit primary residence.
That means you generally need to retain at least 20% equity after the refinance. Lower maximums can apply to second homes, investment properties and properties with multiple units.
For an eligible one-unit primary residence worth $500,000:
- Home value: $500,000
- Maximum LTV: 80%
- Maximum new loan: $400,000
If the mortgage payoff is $315,000, the difference would be $85,000 before closing costs, prepaid expenses and other deductions.
A conventional cash-out refinance must also meet loan-limit, credit, debt-to-income and seasoning requirements. The property may support a $400,000 loan based on LTV, but the lender can approve a smaller amount if your financial qualifications or the applicable conforming loan limit require it.
How Much Can You Cash Out With an FHA Refinance?
An FHA loan generally limits a cash-out refinance to 80% LTV.
FHA cash-out eligibility also includes requirements covering:
- Principal-residence occupancy
- Property ownership
- Mortgage payment history
- Credit and income qualification
- FHA loan limits
- Property condition and appraisal
The maximum base mortgage is limited by both the FHA’s 80% LTV rule and the applicable FHA loan limit. A high property value does not allow the new base loan to exceed the county limit.
FHA cash-out loans also include upfront and annual mortgage insurance premiums. The financed upfront mortgage insurance premium increases the total loan balance but does not increase the amount of equity available as cash.
The differences between an FHA and conventional cash-out refinance include mortgage insurance, loan limits, eligibility and how the final loan amount is calculated.
How Much Can You Cash Out With a VA Refinance?
A VA cash-out refinance can permit a loan amount up to 100% of the home’s appraised value under VA program guidelines.
This is higher than the standard 80% maximum for eligible conventional and FHA cash-out refinances. However, 100% LTV is a program maximum rather than a guarantee. Lenders can establish lower limits based on their underwriting and investor requirements.
The amount available also depends on:
- Your VA home loan eligibility
- The VA appraisal
- The existing mortgage payoff
- Other property liens
- The VA funding fee
- Closing costs
- Your income, credit and residual income
- The lender’s maximum LTV
VA rules allow the financed funding fee to be included in the loan calculation. Borrowers who meet VA funding fee exemption requirements do not pay the fee.
A 100% LTV loan also does not mean you receive the full property value in cash. The existing mortgage and other financed amounts are paid first.
How to Calculate Your Maximum Cash-Out Amount
Start with the home value expected to be accepted by the lender. Multiply that value by the maximum LTV for your loan program. Then subtract all debts and costs that must be paid from the new loan.
Cash-Out Refinance Example
Assume:
- Home value: $450,000
- Maximum LTV: 80%
- Current first-mortgage payoff: $285,000
- Home equity loan payoff: $20,000
- Closing costs paid from proceeds: $8,000
Step 1: Calculate the maximum loan amount.
$450,000 × 80% = $360,000
Step 2: Subtract the first-mortgage payoff.
$360,000 − $285,000 = $75,000
Step 3: Subtract the home equity loan.
$75,000 − $20,000 = $55,000
Step 4: Subtract the closing costs financed through the transaction.
$55,000 − $8,000 = $47,000
The estimated cash proceeds would be $47,000.
The final amount can change when the lender receives the appraisal, formal payoff statements and final closing figures. You can use our cash-out refinance calculator to estimate how your home value, mortgage balance and LTV limit affect the amount available.
How Does a HELOC Affect Your Cash-Out Limit?
A home equity loan or home equity line of credit secured by the property can reduce your available cash-out amount.
If the account is paid off through the refinance, its payoff is deducted from the maximum new loan amount along with the first mortgage. If it remains open, the lender may calculate your combined loan-to-value ratio, or CLTV.
CLTV includes the first mortgage and subordinate financing:
First mortgage + subordinate loan balances or credit limits ÷ home value = CLTV
For a HELOC, the lender may use the full credit-line amount rather than only the balance when calculating the applicable home equity combined loan-to-value ratio.
You can use our CLTV calculator to compare your home-secured debt with the estimated property value.
What Reduces the Amount You Can Cash Out?
A Lower Appraisal
The lender bases the LTV calculation on the value accepted for underwriting. If the appraisal is lower than expected, the maximum loan amount also falls.
For example, an 80% LTV loan on a $400,000 property can be as high as $320,000. If the appraisal is $375,000, the same 80% limit would reduce the maximum to $300,000.
Closing Costs
Origination charges, discount points, appraisal fees, title costs, government fees and other expenses reduce the proceeds when paid from the new loan.
You may pay some or all of these costs with cash instead, but doing so increases the amount you must bring to closing.
Prepaid Expenses and Escrow Funding
Your cash-to-close calculation may include prepaid interest and deposits for property taxes and homeowners insurance. These amounts are separate from lender and title charges, but they can still reduce the proceeds you receive.
Second Mortgages and Other Liens
A home equity loan, HELOC, tax lien, judgment or other property lien may need to be paid through the refinance. Each payoff uses part of the available loan proceeds.
Loan Limits
Conventional and FHA mortgages are subject to applicable loan limits. The maximum based on LTV may exceed the maximum loan available under the selected program.
Credit, Income and Debt
The property may support a larger loan than you can qualify to repay. The lender reviews your income, debts, credit and other financial obligations before determining the approved amount.
Lender Requirements
Lenders can use lower LTV limits or stricter credit standards than the underlying loan program. This is especially relevant for VA cash-out refinances, where the program permits up to 100% LTV but many lenders cap the loan below that level.
Equity and Available Cash Are Different
Your total home equity is the property value minus all debts secured by the home. Available cash-out is the portion you can borrow while staying within the program’s LTV and qualification limits.
Suppose your home is worth $500,000 and you owe $300,000. You have approximately $200,000 in gross equity.
At an 80% maximum LTV:
- Maximum loan: $400,000
- Mortgage payoff: $300,000
- Maximum difference before costs: $100,000
- Equity remaining after the new loan: $100,000
You cannot generally withdraw the entire $200,000 because the lender requires equity to remain in the property.
Cash-Out Refinance Alternatives
A home equity line of credit can let you borrow through a revolving credit line while keeping your existing first mortgage. A cash-out refinance replaces the first mortgage with a larger loan.
The differences between a HELOC and a cash-out refinance include how funds are distributed, whether the first mortgage is replaced and whether the interest rate is typically variable or fixed.
A home equity loan generally provides a lump sum through a separate installment loan. The costs of a cash-out refinance and home equity loan can differ substantially when your existing first mortgage has a lower rate than current refinance options.
The Bottom Line
Conventional and FHA cash-out refinances generally allow eligible borrowers to finance up to 80% of a primary residence’s appraised value. VA guidelines can allow up to 100% LTV, but lenders may set lower maximums.
Your estimated proceeds equal the maximum approved loan amount minus the current mortgage payoff, other liens, closing costs and financed fees. The appraisal, property type, occupancy, credit, income and loan limits can further reduce the amount available.
Calculate both the cash you would receive and the equity that would remain after closing. Taking the maximum amount increases the balance secured by your home and can raise the monthly payment and total interest.
Frequently Asked Questions
What Is the 80% Rule for a Cash-Out Refinance?
The 80% rule limits the new mortgage to 80% of the home’s accepted value. For a $400,000 property, the maximum loan would generally be $320,000. The mortgage payoff and costs are deducted from that amount before cash is distributed.
Can You Cash Out 100% of Your Home Equity?
Generally, no. Conventional and FHA cash-out refinances typically require at least 20% equity to remain in an eligible primary residence. VA guidelines can permit up to 100% LTV, but the mortgage payoff, fees and lender limits affect the amount you receive.
What Is the Maximum Conventional Cash-Out Refinance?
A conventional cash-out refinance on a one-unit primary residence generally has a maximum 80% LTV. Lower limits can apply to second homes, investment properties and properties with multiple units.
What Is the Maximum FHA Cash-Out Refinance?
An FHA cash-out refinance generally has a maximum 80% LTV. The loan must also remain within the applicable FHA loan limit and meet FHA occupancy, payment-history, appraisal and underwriting requirements.
What Is the Maximum VA Cash-Out Refinance?
VA guidelines permit cash-out refinance loans up to 100% of the appraised value, including the financed funding fee. Lenders may cap the LTV below the VA maximum.
How Much Equity Do You Need for a Cash-Out Refinance?
A conventional or FHA cash-out refinance generally requires at least 20% equity to remain after closing. A VA cash-out refinance may allow less retained equity, subject to VA and lender requirements.
Does Your Credit Score Affect How Much Cash You Can Take Out?
Yes. Your credit can affect eligibility, interest-rate pricing and the maximum LTV offered by the lender. A stronger property equity position does not replace the need to qualify financially for the new mortgage.
Do Closing Costs Come Out of Your Cash-Out Proceeds?
They can. If closing costs are paid from the new loan proceeds, they reduce the cash you receive. You may also be able to pay eligible costs separately at closing.
Can You Take Less Than the Maximum Cash-Out Amount?
Yes. You can request a smaller loan and retain more equity. Borrowing less can reduce the monthly payment, interest charges and risk of owing close to the home’s value.
How Is Cash From a Refinance Paid?
Eligible proceeds are generally distributed after closing and any applicable federal rescission period. The settlement provider may send the funds by wire or another approved method.
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