A cash-out refinance is smart when your rate is close to market rates or the house is paid off, and a trap when it reprices a low rate on everything you owe. It replaces your mortgage with a bigger one and pays you the difference, minus closing costs. Conventional and FHA cap it at 80% of value on a one-unit home you live in; VA allows up to 100%, though most lenders stop at 90%.
Example terms: a $427,500 Conventional 30-year fixed loan (5% down on a $450,000 purchase) at 7.490% interest, 7.880% APR, is repaid in 360 monthly payments of $2,986.22 for principal and interest. Payments do not include taxes and insurance premiums, so the actual payment obligation will be greater. Monthly mortgage insurance is added until it is removed. Includes 0.026% in discount points ($111). Purchase of a $450,000 single-family primary residence in Chesterfield County, Virginia; 740 credit score; 30-day rate lock; debt-to-income under 43%. Loan amounts are base loans; where an upfront FHA premium or VA funding fee is financed, it is added on top and the payment is figured on the total. Payments are principal and interest only. Terms as of November 9, 2026. Other numbers on this page are illustrations, not offers. Any rate shown on this site is an example. Rates may change or may not be available at the time of loan commitment or lock-in. More example terms and APR.
Refinancing to lower your monthly payment can increase the total finance charges you pay over the life of the loan.
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A cash-out refinance is the simplest way to turn home equity into cash, and the easiest way to give away a low mortgage rate without noticing. Here is how much a cash-out refinance lets you take, how long you have to wait, and the math that tells you whether yours is smart or a trap.
What is a cash-out refinance?
A cash-out refinance pays off your current mortgage with a new, larger one. The difference, minus closing costs, comes to you at closing or goes straight to the creditors you choose to pay off. On a house you own free and clear, it puts a new first mortgage on the property. A plain rate-and-term refinance only lets a small amount of cash come back to you, so anything bigger is cash-out, with its own limits and pricing.
The other way to reach equity is a second loan behind the one you have, a HELOC or a fixed second, which leaves your first mortgage and its rate alone. HELOC vs cash-out refinance runs those side by side; this page is about the cash-out itself.
How much equity can I take out?
Each program caps the new loan at a percentage of the home’s value. Everything you owe gets paid off first, then the closing costs, and what is left is your cash.
Maximum new loan on a cash-out refinance
- Conventional, one-unit home you live in
- 80%of value; one borrower on title at least 6 months, and the first mortgage being paid off at least 12 months old
- Conventional, 2- to 4-unit home you live in
- 75%of value; same waiting rules
- Conventional, one-unit second home
- 75%of value; same waiting rules
- FHA
- 80%of value, home you live in only; owned and lived in for 12 months, with 12 months of on-time payments
- VA
- Up to 100%of value by law, though most lenders stop at 90%; a waiting period and a net-benefit test apply
Conventional figures are Fannie Mae’s standard limits as of November 2026. Rentals are covered further down. VA cash-out loans also carry a funding fee unless you are exempt; the VA funding fee page has the rates.
Maximum cash on a $400,000 home, conventional
| Maximum new loan (80% of $400,000) | $320,000 | |
| − | Current mortgage payoff | $200,000 |
| − | Closing costs | $8,000 |
| = | Cash to you, about | $112,000 |
Ask for what the plan needs, not the maximum. Every $1,000 you take adds about $6 a month at an example rate of 6.5%.
Hypothetical example, rounded.
How long do I have to wait to do a cash-out refinance?
Every program has a seasoning rule: time you must own the home or hold the current loan before you can take cash out.
- Conventional: at least one borrower on title for six months, and the first mortgage being paid off must be at least 12 months old, note date to note date. There is no title wait on a home you inherited or were awarded in a divorce.
- Bought with cash: conventional’s delayed financing exception lets you cash out within six months of an arm’s-length purchase where no mortgage was used. The new loan is capped at the documented money you put in plus the new loan’s closing costs, prepaids and points, the usual cash-out limits still apply, and so does cash-out pricing.
- FHA: you must have owned and lived in the home as your principal residence for 12 months before the case number is assigned, with every mortgage payment made within the month due for the past 12 months.
- VA: there is a waiting period and a net-benefit test. I confirm the current rules on your file before you plan around a date.
One more conventional rule: if family gift money helped you buy, the cash-out cannot be used to pay them back.
The real cost: giving up a low first rate
A cash-out refinance does not just charge interest on the cash. It reprices every dollar you already owe at the new rate. Once you get the cash out, you get the cash out. It’s done.
What $60,000 really costs when it replaces a 3.25% loan
| First-year interest, new $316,000 loan at 6.5% | $20,436 | |
| − | First-year interest, current $250,000 loan at 3.25% | $8,027 |
| = | Extra interest in year one | $12,409 |
That is about 21% of the $60,000 in the first year alone, and the payment rises about $779 a month.
Hypothetical example: $250,000 left with 25 years to go, $60,000 of cash plus $6,000 of costs rolled in, example rates, rounded.
For comparison, a second loan for the same $60,000 at an example rate of 7.5% would cost about $4,500 of interest in year one and leave the 3.25% alone. That gap is why I point most low-rate owners to a HELOC or a fixed second before a cash-out. If the cash is for the down payment on your next home, a line of credit on the home you live in usually does that job too, which is the idea behind the Blue Collar House Hack.
$250,000 left at 3.25% with 25 years to go. The cash-out is a new $316,000 loan at an example rate of 6.5%, with $60,000 of cash plus $6,000 of costs rolled in. The second loan is $60,000 at an example rate of 7.5%. Hypothetical, not a quote.
See the numbers
| Extra interest in year one | |
|---|---|
| Cash-out refinance | $12,409 |
| Second loan | $4,500 |
Cash-out wins when:
- Your current rate is close to, or above, what you could get now, so repricing the balance costs little or even saves money.
- The house is paid off. There is no low rate to give up.
- You need one fixed sum and will not draw again. Need access over time, or might invest it? That is a line of credit.
- It is a rental, where lines of credit are weaker (more below).
Cash-out refinance to pay off debt
Paying off cards and car loans is a common reason to cash out, and it is where the math needs the most honesty. My process: pull credit, list every debt with its balance and payment, pick the payoffs that actually change your month, then price it and compare the cash back with the new payment. The payoffs go straight from closing to each creditor, using official payoff letters.
Folding $35,000 of debt into a refinance
| Mortgage payment now (7.5%, 28 years left) | $1,996 | |
| + | Car loans and credit cards | $900 |
| − | New mortgage payment ($321,000 at 6.5%) | $2,029 |
| = | Monthly payments freed up | $867 |
About $226 of that comes from the lower rate on the mortgage itself. The rest is debt payments moving into a 30-year loan.
Hypothetical example: $280,000 mortgage, $35,000 of other debt, $6,000 of costs rolled in, home worth $420,000, principal and interest, example rates, rounded.
The $35,000 did not go away. It moved onto your house. Carried for the full 30 years at 6.5%, that slice costs about $221 a month and about $44,600 in interest, on debts that might have been gone in four or five years. The fix is the same one from when to refinance: keep paying the old total. Send the full $2,896 to the new loan and the whole mortgage is paid off in about 14 years.
- Paying the new $2,029
- Paying the old $2,896 total
$321,000 at an example rate of 6.5% over 30 years, principal and interest only. The $2,896 is the old $1,996 mortgage payment plus the $900 of car loans and cards it replaced. Hypothetical, not a quote.
See the numbers
| Payments made | Paying the new $2,029 | Paying the old $2,896 total |
|---|---|---|
| 0 | $321,000 | $321,000 |
| 60 | $300,500 | $239,200 |
| 120 | $272,100 | $126,100 |
| 170 | $240,400 | $0 |
| 240 | $178,700 | $0 |
| 300 | $103,700 | $0 |
| 360 | $0 | $0 |
Watch out
Leave 0% and very low-rate debt where it is; moving it into a mortgage only makes it cost more. And a refinance cannot fix the habit that built the balances. If the cards fill back up, you have the bigger mortgage and the old debt.
Cash-out refinance on an investment property
On a rental, the cash-out refinance is usually the right equity tool. Lines of credit on investment property come with lower limits and higher rates, so the second-loan approach that protects a low rate on your own home does not work as well there.
Cash-out limits on investment property are lower than on a home you live in. Under Fannie Mae’s and Freddie Mac’s standard limits, a cash-out on a one-unit rental tops out at 75% of value and on a 2- to 4-unit rental at 70%, and rent-qualified DSCR loans set their own.
On a paid-off rental, my starting point is a cash-out around 50% of value. I don’t want you overextended, but I want you extended: enough cash to buy or invest, with the rent still carrying the payment comfortably.
| Cash-out on a $300,000 rental | New loan | Payment with taxes and insurance | Left from $2,200 of rent |
|---|---|---|---|
| 50% of value | $150,000 | $1,449 | $751 |
| 60% of value | $180,000 | $1,659 | $541 |
| 70% of value | $210,000 | $1,868 | $332 |
Example investment rate of 7.5%, about $400 a month of taxes and insurance, before vacancy, repairs and management. Rounded.
Refinancing several rentals means one application per property. I run them in tandem, take each to conditional approval, check the new rate and terms on each, then close the ones that make sense.
Price it as what it is. A refinance of the home you live in comes with an occupancy statement you sign, and it has to be true when you sign it. Occupancy fraud is real, and if the house is a rental, it is refinanced as a rental.
Virginia recordation tax on a cash-out refinance
Virginia taxes the new deed of trust when it is recorded. When the new loan refinances a debt that was already taxed, the state rate drops to 18 cents per $100, plus a local tax of one-third of that (about 6 cents) where the locality levies it, which most do. That is about 24 cents per $100, versus about 33 cents on a brand-new loan, and the reduced rate applies whether or not you stay with your current lender.
Cash-out adds a wrinkle. How the clerk taxes the new money is a question for your settlement agent, and the stakes are small: on $60,000 of new money, the gap between the reduced and regular rates is about $56. A paid-off house gets no discount at all. With no existing taxed loan to refinance, the new deed of trust is taxed at the regular rate. The rest of the line items are on the Virginia closing costs page.
Cash-out is a good tool when the new loan is the only one on the property worth having. Run the first-year interest math before anything else. If the new rate on what you already owe costs more than the cash is worth to you, a second loan is the better door.
Questions people ask me about this
Can I get a cash-out refinance with bad credit?
Sometimes, but it costs more. FHA does not insure loans for scores below 500, and conventional loans approved through automated underwriting have no program minimum, but many lenders set their own floor, often 620. Lower scores carry pricing adjustments on top of the ones cash-out already carries, so a weak score makes an expensive loan more expensive.
How much cash will I actually walk away with?
Usually less than the first estimate. The official payoffs include interest up to the payoff date, closing costs come out of the proceeds, and pricing can shift a tier as the final numbers land. I size the request with a small cushion so the plan still works when they do.
Do I need an appraisal for a cash-out refinance?
Usually. Some conventional cash-outs can skip it when the automated underwriting system offers a waiver, which Fannie Mae calls value acceptance and Freddie Mac calls ACE. On a home you live in, that generally means borrowing 70% of the value or less, and the system decides, so you will not know until the loan is run.
Can I open a HELOC after a cash-out refinance?
Yes, on a home you live in it is a common second step. I wait until the first payment on the new loan posts, and some lenders will size the line off your refinance appraisal if it is recent. A big cash-out leaves less equity, so the line will be smaller.
Will a partial claim or an old lien show up when I refinance?
Yes. A refinance pays off every lien recorded against the house unless a second lender agrees to stay behind the new loan, so a partial claim from a past forbearance, an old line of credit or a judgment usually comes out of your equity at closing. VA’s partial claims, for example, are repaid when the loan is refinanced. I pull the recorded liens early so the payoff is not a surprise.
Sources
- Fannie Mae Eligibility Matrix (April 1, 2026), cash-out refinance maximum LTV
- Fannie Mae Selling Guide B2-1.3-03, cash-out refinance transactions
- Freddie Mac, maximum LTV/TLTV/HTLTV ratio requirements
- HUD Handbook 4000.1 (Update 18), FHA cash-out refinance
- U.S. Code, 38 U.S.C. 3710, VA refinance loan limit
- Code of Virginia 58.1-803, recordation tax on refinance deeds of trust
Examples on this page are hypothetical illustrations, rounded for teaching. They are not a quote or an offer to lend. Rates may change or may not be available at the time of loan commitment or lock-in. For example terms with the annual percentage rate (APR), see example terms and APR.