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.
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.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.