What Is a Conventional Cash-Out Refinance — and How Much Equity Can You Tap?
A conventional cash-out refinance lets you access your home equity as cash — for any purpose. But the rules around how much you can take, when you can do it, and how your property must be titled are specific. Here is what you need to know.
What is a cash-out refinance?
A cash-out refinance replaces your existing mortgage with a larger loan. The difference between what you owe and what you borrow comes back to you as cash at closing. You can use the proceeds for home improvements, debt consolidation, investment purchases, education, or any other purpose — there are no restrictions on how you spend the money.
How much equity can you access?
| Property Type | Maximum LTV (Cash-Out) |
|---|---|
| Primary residence (1 unit) | 80% |
| Second home (1 unit) | 75% |
| Investment property (1 unit) | 75% |
| Primary residence (2–4 units) | 75% |
On a primary residence worth $900,000 with no existing mortgage, you could borrow up to $720,000 (80% LTV) in a cash-out refinance — putting up to $720,000 in your pocket minus closing costs.
Seasoning requirements
When using cash-out proceeds to pay off an existing first lien, that mortgage must have been in place for at least 12 months as of the new note date. The property must also have been purchased or acquired at least 6 months before the new closing. If the property was recently listed for sale, it must be removed from the market before closing.
LLC-owned property
If your investment property is held in an LLC, title must be transferred from the LLC into your personal name on or before the note date of the cash-out refinance. Conventional agencies do not permit cash-out refinances on properties held in LLCs at closing.
What cannot be paid with cash-out proceeds
Cash-out proceeds cannot be used to pay down a junior lien that remains open. PACE or HERO energy loans can only be paid off through a cash-out refinance — not a rate-and-term refinance.
A worked example (illustrative example, not a quote)
Your home is worth $1,000,000 and you owe $500,000 on the first mortgage. At the 80% limit for a primary residence, the maximum new loan is $800,000. The new loan pays off the $500,000, so the most you could take is $800,000 − $500,000 = $300,000, before closing costs. If the same property were a second home at the 75% limit, the maximum new loan is $750,000, and the cash drops to $250,000.
Closing costs reduce the check you receive, or can be added to the loan if the limit allows. The appraisal drives the value, so a lower appraisal lowers the number.
Cash-out refinance or HELOC?
| Question | Cash-out refinance | HELOC |
|---|---|---|
| What happens to my current first mortgage? | Paid off and replaced | Stays in place |
| How is the money delivered? | One lump sum at closing | Drawn as needed within a limit |
| Best when | You also want a new rate or term | Your current first mortgage is one you want to keep |
Terms on a HELOC vary by program and borrower profile; we confirm the current guidelines when we review your scenario. You can read more in our HELOC overview.
Common mistakes
- Ignoring what you give up. A cash-out replaces the entire first mortgage, so compare its terms, not only the cash.
- Using the money for something that does not hold value. Converting short-term spending into a 30-year debt has a real cost.
- Forgetting seasoning. Timing rules on the existing loan and your ownership can delay the closing date. Special cases, such as inherited property or delayed financing, may have waivers; ask us.
- Not planning for the tax angle. The tax treatment of mortgage interest depends on how you use the proceeds. Consult a tax professional.
Frequently asked questions
Can I take cash out of a home I bought recently?
Possibly, but the ownership and seasoning rules apply. Delayed financing, for a property bought with cash, is a separate path with its own conditions.
Do I need to pay off my credit cards with the proceeds?
No, though many borrowers do. Paying off revolving debt at closing can also lower your debt-to-income ratio.
How is the amount determined if I also have a second loan?
A second lien that stays open cannot be paid down with the proceeds, and it still counts in the combined balance. Tell us about every lien on the property up front.
Related guides
- Refinancing a conventional loan
- Refinance calculator
- Cash-out timeframes
- HELOC versus home equity loan
Borrowing against a California rental
If the property is a rental, these guides explain the options, limits and what lenders check.
- HELOC or cash-out refinance on a rental
- Renovating a rental: which to use
- How much equity you need on a rental
- All about borrowing against a California rental
Key takeaways
- Maximum LTV for cash-out on a primary residence: 80%. Second home and investment: 75%.
- Existing first mortgage must be seasoned 12 months; property must be owned 6+ months.
- Proceeds can be used for any purpose — no restrictions on spending.
- Investment properties in an LLC must be transferred to personal name before the cash-out closes.
- Junior liens that remain open cannot be paid down with cash-out proceeds.
- PACE or HERO energy loans can only be paid off through a cash-out — not a rate/term refinance.
- On a $1,000,000 home with a $500,000 balance, an 80% cash-out limit allows up to $300,000 before costs.
- A cash-out replaces your whole first mortgage, so compare your current rate and terms first.
- A HELOC leaves the first mortgage alone and may suit smaller cash needs.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.